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EBSA News Release: [01/16/2004]
Contact Name: Ed Frank
Phone Number: (202) 693-4676

U.S. Labor Department Files Friend of the Court Brief in WorldCom Class Action Lawsuit

WASHINGTON—The U.S. Department of Labor today filed an amicus brief in the WorldCom class-action litigation stemming from the loss of millions of dollars in the WorldCom 401(k) pension plan, when the company’s stock price collapsed following revelations of accounting irregularities.

“As with Enron, we filed this brief to ensure that those responsible for protecting workers’ retirement savings live up to their responsibilities,” said Assistant Secretary Ann L. Combs.

The brief, filed in federal district court in New York, states that the Employee Retirement Income Security Act (ERISA) imposes an obligation on those who appoint plan fiduciaries to monitor the appointees' performance. It is the Department of Labor’s long-held position that individuals who appoint trustees or other pension plan fiduciaries are themselves fiduciaries. In this capacity, they have an obligation to monitor the performance of those they appoint and ensure their compliance with ERISA.

In this case, In re WorldCom, Inc. ERISA Litigation, the private plaintiffs allege that certain members of the WorldCom Board of Directors exercised authority over the appointment of plan fiduciaries, and therefore, that the individual Board members were themselves fiduciaries. They further allege that the defendant Board members failed to properly monitor the work of the fiduciaries they appointed, and that the plan was injured as a result.

The department's brief argues that appointing fiduciaries have an obligation to periodically monitor the work of those they appoint, and to take appropriate action if the appointees’ conduct falls short of ERISA’s standards. The brief stresses, however, that appointing fiduciaries are not guarantors of the actions or of the success of the investment decisions made by the fiduciaries they appoint. Rather, the obligation of appointing fiduciaries is to make appointment and removal decisions with prudence and loyalty, and to periodically monitor the performance of those they appoint. Appointing fiduciaries have an important responsibility to implement reasonable procedures to review and evaluate the performance of appointees on an ongoing basis.

A copy of the department’s brief will be available on EBSA’s website at www.dol.gov/ebsa. The department’s investigation of WorldCom is on-going.

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