The U.S. Department of Labor announced on Monday that DST Systems Inc., Windsor, Conn., and its fiduciaries have agreed to pay more than $124.6 million to settle a long-running dispute related to the company's 401(k) profit-sharing plan.
The settlement resolves litigation both by the DOL and participants in the plan against DST Systems, investment advisory firm Ruane, Cunniff & Goldfarb and individual defendants, pending court approval of the related class action settlement.
Participants in the plan originally filed a class-action lawsuit in September 2017 in U.S. District Court in New York, alleging that the defendants pursued "an exceptionally imprudent investment strategy with respect to a significant portion of the plan's assets." A lawsuit filed by the DOL followed in October 2019, alleging that defendants violated the Employee Retirement Income Security Act by failing to "diversify the plan's assets to minimize the risk of large losses and failing to act prudently and loyally in managing these assets when the investment manager invested the plan's assets on a highly concentrated basis in a select number of securities," a DOL news release said Monday.
The complaint originally filed in September 2017 alleged that the defendants pursued "an exceptionally imprudent investment strategy with respect to a significant portion of the plan's assets."
The lawsuit centered on the plan's mutual fund Sequoia Fund, which at one point invested 45% of the plan's assets in the soon-to-plummet stock of what was then called Valeant Pharmaceuticals International.
The DOL's Employee Benefits Securities Administration found that "Ruane, Cunniff & Goldfarb controlled 100 percent of the investments of the profit-sharing portion of the plan, and that DST Systems and individual defendants failed to monitor the investment manager's activities properly," according to the news release. The news release noted the firm has taken steps to limit the investment concentrations of other ERISA plans it manages.
