White, Graham, Buckley & Carr partners Bryan White and William Carr are representing employees of SS&C Technologies and several former employees of DST Systems in filing claims against the firms, claiming violations of the Employee Retirement Plan Security Act (ERISA) in relation to an investment in the firm’s 401(k) profit-sharing plan.
The claims state that a portion of the plan’s assets are invested in the DST Systems Inc. Master Trust, which is managed by defendant Ruane, Cunniff & Goldfarb & Co. Inc. Ruane is also the distributor and adviser to the Sequoia Fund Inc., a former client of DST. Participants could not exercise control of their investments in the profit sharing plan.
DST disclosed that that the profit sharing plan was not properly diversified, and that rather than minimizing the risk of large losses to the plan, the plan’s fiduciaries caused and allowed plan assets to be invested imprudently in the stock of Valeant Pharmaceuticals International Inc., leading to enormous losses in the plan and all participants when the stock dropped from July 31, 2015 to January 10, 2016.
By the end of 2014, approximately 30 percent of the profit sharing plan consisted of Valeant stock. This amounted to approximately 15 percent of the combined 401(k) and profit sharing plan’s assets and constituted a clear breach of the defendants’ duty to diversify plan assets in an appropriate and prudent manner, the plaintiffs allege.
In addition, the claims state that DST failed to prudently select and monitor the investment manager and the plan’s investments, failing to investigate the merits of the plan’s investments. The claims also state that DST failed to select and retain an investment manager with whom they had no selfish interest apart from the interests of the participants, and also failed to take the appropriate steps to advice, and cause to be advices, the participants that the plan was and had been in the past invested in an undue concentration or advising participants that had suffered significant losses as a result of improper and ill-advised investment.
The claims set out how particularly risky growth strategies were pursued, which did not meet the DST profit sharing plan’s investing criteria or the criteria of a prudent fiduciary. They also state that fiduciaries would have known that Valeant was a volatile and risky stock because the aggressive strategy was public and subject of industry scrutiny and speculation. The complaints state that DST not only retained Ruane, but continued to follow the advice, knowing it was flawed. In addition, Ruane is the distributor and adviser to the Sequoia Fund Inc., under which the plan invests in Valeant, which, in turn, is a client of DST, and because of this DST receives compensation from a fund for which Ruane is the advisor.