Retirement plan fiduciaries to pay more than $124.6M to settle lawsuits brought by Department of Labor, others
NEW YORK – Fiduciaries of a retirement plan sponsored by DST Systems Inc. — including New York City-based investment management firm Ruane, Cunniff & Goldfarb Inc. — will pay more than $124.6 million to resolve violations of federal law related to their failure to manage the profit-sharing portion of the plan properly.
DST Systems, an information processing software and service provider based in Kansas City, was acquired by SS&C Technologies Holdings Inc. in Windsor, Connecticut.
The settlement resolves litigation by the U.S. Department of Labor and private plaintiffs against Ruane, Cunniff & Goldfarb, DST Systems and individual defendants, pending court approval of the related class action settlement. In October 2019, the department filed suit in the U.S. District Court for the Southern District of New York 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.
The complaint highlighted an example in which the investment manager invested the plan’s assets in the stock of a single pharmaceutical company, Valeant Pharmaceuticals International Inc. The concentration in Valeant stock grew to more than 45 percent of the plan’s assets. Soon after, Valeant’s stock fell dramatically in price. The plan’s participants experienced significant losses to their retirement savings because of the plan’s concentrated portfolio.
An investigation by the department’s Employee Benefits Security Administration identified ERISA violations, and 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. Since the events that gave rise to the Secretary’s complaint, Ruane, Cunniff & Goldfarb has taken steps to limit the investment concentrations of other ERISA-covered plans it manages.
“This resolution protects the rights and benefits of the plan’s participants and shows that we will aggressively pursue appropriate legal action to ensure those rights and benefits,” said Solicitor of Labor Seema Nanda. “Fiduciaries to retirement plans must comply with the Employee Retirement Income Security Act’s safeguards – including diversification – to protect workers’ retirement benefits and fulfill their own fiduciary responsibilities.”
“This settlement restores hard-earned retirement funds for more than 9,000 participants in DST Systems’ retirement plan. The U.S. Department of Labor is determined to investigate and seek remedies for potential violations of the Employee Retirement Income Security Act,” said Assistant Secretary for Employee Benefits Security Lisa M. Gomez.