This is a certified class action lawsuit filed by current and former New York Life Insurance Company ("NYL") employees and agents against NYL and the Board of Trustees of the Company's employee and agent pension and 401(k) plans ("the Plans"), involving the investment of assets in the Plans.
Final Settlement Approved
On March 5, 2008, the Court entered its approval of the final settlement in the amount of $14 million to be awarded to current and former participants in the 401(k) plans who had account balances during the class period. The settlement also calls for the plans' fiduciaries to utilize an independent adviser to provide advice regarding appropriate investments for each of the plans.
History of the Litigation
The case was originally filed in November 1999 as an individual whistleblower action by a former NYL employee who managed NYL mutual funds through a NYL affiliate and who was allegedly terminated in part because he complained about the alleged ERISA violations the plaintiffs raised in their original class complaint in June 2000.
In July 2000, Plaintiffs amended their complaint to assert ERISA and RICO claims on behalf of a class of participants and beneficiaries in the NYL Plans. In March 2001, Judge Kauffman of the Eastern District of Pennsylvania (Philadelphia) granted defendants’ motion to dismiss the RICO claims against NYL and denied defendants’ motion to dismiss certain ERISA claims.
In November 2001, Judge Kauffman certified the case as a class action. Plaintiffs filed an amended Complaint on February 20, 2003 to attempt to cure the inadequacies as plead in the dismissed RICO claims of the amended complaint. In July 2005, Judge Kauffman granted defendants’ motion to dismiss the RICO claims from the revised third amended complaint.
On October 25, 2007, Judge Kaufman entered a Memorandum and Order (see link to right) granting Plaintiffs' Motion for Class Certification of Modified Settlement Class, preliminarily approved the proposed Settlement and ordered that notice of the Settlement be distributed to members of the Class. The Court set a hearing for consideration of final approval of the Settlement for Tuesday, January 22, 2008. Under the terms of the attached proposed Settlement, Defendants have agreed to pay $14 million to settle the claims asserted by the Plaintiffs with respect to all of the Plans of which amount $9.8 million will be allocated to the 401(k) Plans and $4.2 million will be allocated to the Pension Plans. The Settlement also provides for other injunctive relief.
Summary of the Allegations
Plaintiffs' central focus is the Defendants' alleged intentional and/or imprudent and disloyal failure to take advantage of the Plans' considerable bargaining clout to obtain low-cost, high-quality investment management services available through "direct" or "separately managed account" management (offered either by NYL's affiliates or managers unaffiliated with NYL) or other appropriately-priced investment vehicles, and instead to use the far more expensive NYL-proprietary mutual funds -- namely, the New York Life Institutional/MainStay Institutional/Eclipse Funds, priced to be marketed to smaller investors -- in an effort to build those product lines and boost Company profits.
The Complaint alleges that the unlawful scheme began in the early-to-mid 1980's with NYL's creation of a line of "Separate Accounts" -- pooled investment accounts offered by insurance companies to relatively modest-sized employee benefit plans -- largely with assets taken from the large Pension and 401(k) Plans. The alleged scheme continued throughout the 1990's, and at least until March of 2001. At that time, and as a direct result of the filing of the First Amended Complaint in June 2000, the Trustees finally withdrew $1.8 billion of Pension Plan assets, but not the assets of the 401(k) Plans, from the MainStay Institutional/Eclipse Funds -- another investment product that NYL sought to market to third-party investors and had seeded using Plan assets. The $1.8 billion in Pension Plan assets were then placed in newly created, Plan-specific Separate Accounts at a substantially reduced, although still allegedly excessive, cost.
The Complaint alleges that the Defendant Plan Trustees also separately breached their strict ERISA fiduciary duties to the Plans by: (1) failing to prudently inquire into the appropriateness of the Plans' investments in the Separate Accounts and the MainStay Institutional/Eclipse Funds, including the appropriateness of the fees and expenses associated with those investments for Plans the size of the NYL Plans and the appropriateness of NYL and its affiliates acting as managers (indeed, the exclusive managers) of the Plans' assets; (2) failing to bring to bear their own knowledge and expertise in making those investments; and (3) failing to take vigorous steps to overcome the influence of their own personal and financial interests in the success of the company's Separate Accounts and the MainStay Institutional/Eclipse Funds, as well as the interest of their advisor Livornese, who was President of the MainStay Institutional/Eclipse Funds, by seeking disinterested outside advice on the appropriateness of the Plan investments in those products and/or using NYL and its affiliates as manager of Plan assets. Plaintiffs seek damages and a variety of other relief to make the Plans and participants whole and prevent future violations.
The Complaint also asserts the individual claims of plaintiff James A. Mehling, alleging that NYL fired Mr. Mehling, a long-time, highly successful employee, when it realized he had discovered its wrongdoing and would likely disclose Defendants’ scheme. Mr. Mehling thus asserts a variety of wrongful discharge claims and claims for various benefits which NYL has denied him.
Persons To Contact for More Information
If you have information which might assist us in the investigation of these allegations, please contact:
Cohen Milstein Sellers & Toll PLLC
1100 New York Avenue, N.W., Suite 500
Washington, D.C. 20005
Telephone: 888-240-0775 or 202-408-4600