Employees Sue The Hartford Over Retirement-Plan Stock Losses
By Diane Levick
November 14, 2008
With all its troubles, The Hartford is now facing a barrage of litigation from its own employees, who have lost hundreds of millions of dollars in their retirement savings plan by investing in the company's stock.
At least one law firm sued The Hartford Financial Services Group Inc. this week, and several others said they're considering lawsuits. Allegations include mismanagement of the 401(k) retirement plan and failure to disclose the company's true financial condition to participants.
The plan had total assets of $3.04 billion at the end of 2007, and current and former employees had $650.9 million, or 21.4 percent, of that invested in The Hartford's stock. However, since Dec. 31, the stock price has plummeted 88 percent, from $87.19 to $10.46 a share, as investors reacted to soured investments, depressed variable annuity profits and a disappointing 2009 outlook.
"The losses certainly have been dramatic over the past year; a lot of people have lost a lot of money," said Robert A. Izard, a partner in the Hartford law firm Izard Nobel. The firm is local counsel for a civil suit proposed as a class action and assigned to Judge Peter C. Dorsey in U.S. District Court in New Haven.
The suit says employees weren't warned about The Hartford's "excessively risky investment practices" and trouble in the annuity business.
"We intend to defend the action vigorously," The Hartford said Thursday.
Law firms Milberg LLP and Keller Rohrback LLP said they're also investigating The Hartford for possible 401(k) lawsuits.
"The Hartford is confident that its investment and savings plan is being appropriately administered in the best interest of employees," company spokeswoman Shannon Lapierre said. "No part of any plan contributions, either from employees or the company, is required to be made in The Hartford's stock."
But plaintiffs' attorneys question whether the stock should have been kept as an investment choice at all. The suit alleges that the defendants failed to prudently manage or oversee the plan as required by the federal Employee Retirement Income Security Act.
Employees invest in their company's shares because "they think they know their company better than other investments. In truth, they don't," said Derek Loeser, a partner in Keller Rohrback. "They tend to believe what management says."
Employee lawsuits over companies' stock in 401(k) plans have become common since Enron workers lost retirement nest eggs in 2001, said Lori G. Feldman, a partner at Milberg.
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