Lora McKay claims the bank violated its Employee Retirement Income Security Act (ERISA) fiduciary responsibilities by having company stock as a plan option despite suffering major losses from the nation’s mortgage crisis. The suit charges that because of the fiduciary breach, bank employees lost $50 million in retirement assets after the bank’s stock gave up 99.7% of its value.
McKay alleges the ERISA breach took place from April 18, 2007, to the present and requests that the suit be certified as a class action to represent other employees with company stock investments.
McKay charged the stock was artificially inflated during the named period because the bank:
- engaged in high-risk loan origination, mortgage warehouse lending, and investment practices;
- lacked adequate internal and financial controls;
- grossly mismanaged risk and liquidity;
- engaged in improper accounting practices; and
- did not adequately set up a reserve for loan losses.
The complaint asserts that despite the fiduciaries’ knowledge of Colonial Bank’s risky lending practices, they continued to present a positive outlook regarding the bank’s stock as an investment for employees.
The case is McKay v. Colonial BancGroup Inc., M.D. Ala., No. 2:09-cv-00806.