Compliance January 7, 2011

Court Allows Ambac Stock Drop Case to Proceed

A federal judge in New York rejected claims that plan fiduciaries are immunized against stock drop suits if the plan mandates company stock investments; a decision not commonly seen.
Reported by

U.S. District Judge Harold Baer Jr. of the U.S. District Court for the Southern District of New York held that plan fiduciaries at Ambac Financial Group cannot blindly follow plan documents in contravention of the mandates of ERISA (Employee Retirement Income Security Act) and at the same time satisfy their fiduciary obligations.

With that ruling, Baer cleared the way for Ambac employees to proceed with their claims that fiduciaries breached their ERISA duties by continuing to offer company stock even after it was no longer prudent to do so. The employee lawsuit alleged that between 2004 and 2007, Ambac fundamentally changed its business strategy by lowering its underwriting and standards, exposing itself to billions of dollars of losses on high-risk transactions. Ambac shares dropped in value from $96 per share to $1 per share during the period covered by the suit.

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However, Baer stopped short in deciding whether the Ambac fiduciaries should be accorded the presumption they acted prudently, which is frequently applied in stock drop decisions.  

The case is Veera v. Ambac Plan Administrative Committee, S.D.N.Y., No. 10 CV 4191 HB.

Deals & People January 6, 2011

Newport Turns to Schaffernoth for VP Position

The Newport Group appointed Rob Schaffernoth as Vice President, Retirement Services, a newly created position at the company.
Reported by

Schaffernoth will develop and deploy a variety of new business process management initiatives, the company said.

Prior to joining Newport, Schaffernoth was a principal in Sungard’s Wealth Management Global Services. In that role, he consulted with clients on their operational environment, strategically assessing operations and services as well as managing client projects on-site. He also served as Director of Operations at Invesco, where he developed plan enhancements and improved functionality to ensure that large qualified retirement plans met high standards.

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Schaffernoth earned his bachelor’s degree in business administration from Appalachian State University in North Carolina. He also attended the University of North Carolina’s management development program.

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