Compliance May 2, 2016

Kodak Settles ERISA Stock Drop Suit

According to the settlement agreement, more than 21,000 class members will share in the nearly $10 million payment.
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Subject to a court’s final approval, Kodak and a group of employees suing the company have reached a settlement agreement that includes a cash payment of $9,700,000. 

Participants in the  Eastman  Kodak  Employees’ Savings  and  Investment  Plan  (SIP)  and/or  the  Kodak Employee  Stock  Ownership  Plan  (ESOP), sued the company after it filed for bankruptcy in 2012. The participants alleged that Kodak fiduciaries violated the Employee Retirement Income Security Act (ERISA) by permitting the plans to offer  Kodak  stock  as  an  investment  option  after objective information  revealed  that  Kodak  was in  extreme  financial  distress  and  that  Kodak  stock  was  an  extremely  risky  investment  that  was imprudent  for  retirement  asset  investment. 

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The lawsuit covers a class of participants and beneficiaries in the plans that were invested in the Kodak stock fund. According to the settlement agreement, there are more than 21,000 members of the class. 

The settlement agreement for In Re Eastman Kodak ERISA Litigation is here.

Compliance April 29, 2016

Invesco Agrees to Settle DOL ERISA Allegations

Invesco Trust Company agreed to pay a total of $10.27 million to settle the department's claims.
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The U.S. Department of Labor’s (DOL’s) Employee Benefits Security Administration (EBSA) has reached a settlement agreement with a subsidiary of Invesco Ltd., an Atlanta-based investment management firm.

Invesco Trust Company agreed to pay a total of $10.27 million to settle the department’s claims that Invesco Trust Company violated the Employee Retirement Income Security Act (ERISA).

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Invesco operated the Invesco Short-Term Investment Fund (ISTIF), a multi-billion dollar collective fund composed of ERISA plan assets. The DOL contended that Invesco violated ERISA when it undertook a series of measures to ensure that the ISTIF continued to trade at $1 although the fund’s net asset value had fallen below $1 due to losses in the value of the fund’s securities holdings.  

One measure Invesco took was having an affiliate enter into a series of support agreements to provide contingent financial support to the ISTIF without adequately informing the fund’s investors. Invesco also retained a portion of the income earned by the ISTIF to increase the fund’s net asset value instead of distributing that income to investors. Retaining a portion of the ISTIF’s income in the fund not only reduced the distributions to plan investors in the ISTIF, but also reduced the obligations of Invesco’s affiliate under the support agreements. 

The DOL concluded that Invesco did not adequately disclose these measures to ERISA plan investors, and that Invesco’s actions resulted in losses to ERISA plan clients.

The settlement agreement addresses both of these findings by requiring Invesco to regularly disclose to ERISA plan investors the ISTIF’s holdings, its actual market value, and the existence of any supporting measures used to bolster the ISTIF’s net asset value. Additionally, Invesco must restore client losses that resulted from the ISTIF’s retention of income.

Invesco has not responded to a request for comment.

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