Aon Agrees to Pay $1.8M to Settle Stock-Drop Suit

Aon Corp. has agreed to pay $1.8 million to settle a lawsuit alleging 401(k) participants lost tens of millions of dollars when Aon’s overvalued company stock price collapsed in 2004.

In addition to the $1.8 million payment, Aon agreed to retain for a period of at least five years an independent adviser or an independent third-party fiduciary to advise the plan fiduciaries regarding the plan’s investment in Aon stock. The company also agreed that it will take no action for a period of at least five years to restrict participants’ ability to sell company stock in the plan.

The settlement also calls for the plan’s fiduciary structure to be identified in future plan documents and summary plan descriptions starting with the 2010 SPD, and for Aon to make available to plan participants investment education/advisory services for at least five years.

The U.S. District Court for the Northern District of Illinois has given preliminary approval of the settlement agreement.

The suit charged that Aon breached its ERISA fiduciary duty by having more than 40% of the plan’s assets in company stock between October 1998 and October 2004 (see “Court OKs Class Action in Aon 401(k) Company Stock Suit”). During that time, the participants alleged that Aon pressured clients to buy insurance from providers when doing so would maximize payment of contingent commissions.

The suit also claimed Aon inflated its revenues with “clawbacks,” where it allegedly provided discounts to insurers on the condition that Aon would recover those discounts by convincing its clients to deal with those providers.

Aon made known its activities on October 14, 2004, causing its stock to plummet 30% within days.

The case is In re Aon ERISA Litigation, N.D. Ill., No. 04 C 6875.