Jerry Schlichter Quoted In BenefitsPro Boeing Article
By Nick Thornton
After nearly a decade’s worth of litigation, a provisional settlement has been announced in Spano v. Boeing Inc., the 401(k) fee class action case that spawned a new era of litigation under the Employee Retirement Income Security Act.
As recently as this week, Boeing officials had vowed to fight the case until the end, according to reporting in the Wall Street Journal.
Trial was scheduled to begin Wednesday of this week in U.S. District Court for the Southern District of Illinois.
Terms of the settlement were not disclosed. Boeing denied all of the allegations and contented it complied in all respects with the law.
In a recent court order, Judge Nancy Rosenstengel pleaded for the parties to reach a settlement, saying that nine years of litigation has “resulted in deep antagonism and hostile posturing” from attorneys, though she acknowledged the unlikelihood of a resolution.
In a statement, Jerry Schlichter, managing partner at Schlichter, Bogard and Denton, the St. Louis-based firm that originated the case on behalf of a class that ultimately grew to 190,000 claimants, confirmed that the two sides had agreed to come to terms.
“We are pleased to have reached this provisional settlement for the benefit of 190,000 employees and retirees of Boeing. We have been committed for over a decade to improving the 401(k) savings plans that millions of Americans rely on for a secure retirement,” said Schlichter.
At the heart of the claim against fiduciaries to Boeing’s Voluntary Investment Plan, a 401(k) that reportedly holds about $45 billion in participants’ retirement assets, was the allegation that they allowed the plan’s record keeper, State Street Bank, to charge excessive fees, and that fiduciaries also failed their duty to prudence under ERISA by allowing expensive and risky investment options.
Recordkeeping fees were 35 percent more expensive than the highest end of an industry benchmark range, argued the plaintiffs in the claim.
Plaintiffs also alleged that fiduciaries to the plan selected mutual funds with high management fees, allegedly for the purpose of channeling revenue-sharing profits to CitiStreet, a State Street subsidiary.
One State Street small cap proprietary fund included up to 50 basis points in costs for revenue sharing.
In a 2008 deposition, Gary Bland, who served as vice president of trust investments at Boeing until his retirement in 2001, said “I don’t know a sprigging thing about revenue sharing” when plaintiffs’ attorneys asked if he was aware of the fees on a CitiStreet fund.
When asked is he was aware that investment management fees for a fund included 25 to 50 basis points in revenue sharing, Bland said, “I either didn’t know or didn’t care at the time.”