Yet another scene from the tech wreck.
A former employee of Lucent Technologies Inc. filed a class action lawsuit, alleging that the phone equipment maker harmed its pension and benefits plans by investing in Lucent stock as the shares plunged in value, according to Bloomberg.
The lawsuit, filed Tuesday by Carol J. Hudgens, charges that “Lucent failed to disclose business setbacks and inflated revenue, assets and net income in 1999 and 2000. Lucent was obligated not only to tell investors about its problems but also to act in the best interest of the pension and benefits plans it administered when it bought and sold stock for them,” according to Bloomberg’s account of the lawsuit.
The suit claims that Lucent breached its fiduciary obligations under the Employee Retirement Income Security Act (ERISA) by investing money from company pension and benefits plans in Lucent stock between Oct. 20, 1999, and March 22, 2001.
“Despite the fact that it was a breach of Lucent’s fiduciary duties under ERISA to do so, Lucent put its own interests ahead of the interests of the plans and their participants and beneficiaries,” said the complaint, filed in federal court in Newark, according to the wire service.
The complaint further alleges that Lucent used its stock to fund its pension and compensation plan obligations in order to save cash. It also alleged that Lucent avoided hurting its stock by selling shares from the plans on the open market. It also allowed company insiders to sell more than $55 million worth of Lucent shares, according to the Bloomberg story.
Hudgens wants a judge to declare that Lucent breached its fiduciary duties to plan members and to compel the company to “make good … all losses,” including lost return on investments, says Bloomberg.
Lucent’s shares, which traded as high as $71.25 in March 2000, closed Wednesday at $6.25.
In Other Pension and Benefits News…
- A judge ruled that McDonnell Douglas Corp. closed a plant in 1993 to avoid paying pension, health and retiree medical benefits to more than 1,000 older workers. In a 90-page opinion, Judge Sven Erik Holmes found, among other things, that “the record in this case clearly establishes liability” on the part of the company, according to The Wall Street Journal.
The judge also determined that consultants hired by McDonnell Douglas advised the company — bought by Boeing in 1997 — on how it could save money by selecting specific older workers to fire in a plant closing.
According to the Journal, the ruling is surprising since the burden of proof in these kinds of cases rests with the employees.
- Cash-strapped Polaroid Corp. will slash health benefits for both its current employees and retirees, according to The Boston Globe. The newspaper reports that managers at the highly leveraged camera company are desperately trying to avoid bankruptcy.
The Globe claims it has copies of recent memos to both groups. Under the new plan, employees will be required to contribute 50 percent of their health care premiums, up from about 20 percent, according to the paper.
The expected savings? $20 million a year, says the Globe.
If true, Polaroid’s plan would add insult to injury for the company’s retirees. Back in 1988, Polaroid instituted a mandatory employee stock ownership plan to help avoid a hostile takeover attempt. Under the plan, company workers were required to surrender some of their pay in exchange for shares of stock in Polaroid. According to the Globe, these employees were not permitted to sell any of the stock before they left the company.
In 1997, Polaroid stock briefly exceeded $60 a share. Yesterday, however, the share price closed at $1.40.