Participants in a DST Systems Inc. 401(k) plan secured a $79 million payment to settle ERISA complaint against the plan, a mutual fund provider and the former CEO for the provider.
The proposed settlement, which requires court approval, was filed Jan. 8 in a New York City federal district court.
The original complaint, filed in September 2017, accused the defendants of pursuing "an exceptionally imprudent investment strategy with respect to a significant portion of the plan's assets."
The complaint said the defendants "failed to adequately monitor the investments of the plan and the fiduciaries," causing participants to lose "well in excess of $100 million."
According to the proposed settlement, DST Systems will pay $27 million; the investment advisory firm Ruane, Cunniff & Goldberg will pay $21.5 million; and Robert D. Goldberg, the former president and CEO of the firm, will pay $30.5 million.
All defendants denied wrongdoing in the case of Ferguson et al. vs. Ruane, Cunniff & Goldberg Inc. et al.
The complaint focused on the firm's mutual fund, the Sequoia Fund, which made a "shockingly ... enormous and imprudent amount" of plan assets in Valeant Pharmaceuticals International Inc., the original complaint said.
At one point, one of two components in the DST retirement plan held almost 30% of its assets in Valeant. The component was non-participant directed, and the plaintiffs complained about a lack of transparency by the defendants. The original complaint said the Sequoia Fund at one point had 35% of its assets in Valeant.
As an investment adviser to the DST plan, Ruane, Cunniff & Goldberg's actions "constituted a significant and shocking breach of fiduciary duty" by failing to diversify the plan's assets, the original complaint said.
The settlement agreement with DST said plan fiduciaries invested "an inappropriate amount" of plan assets in Valeant's stock and failed to "timely reduce and/or eliminate" the stock from the plan. The settlement agreements with the investment advisory firm and with Mr. Goldberg contained the same comments.
Valeant, which is now called Bausch Health, agreed to pay a $45 million penalty to settle charges by the Securities and Exchange Commission of "improper revenue recognition and misleading disclosures in SEC filings and earnings presentations," according to a July 31 news release from the SEC.
Three former top executives of the company also agreed to pay penalties to settle charges. All of the respondents to the SEC charges neither admitted nor denied the agency's findings, the news release said.
