Compliance October 23, 2012

Judge Moves Forward Fannie Mae Stock Drop Suit

October 23, 2012 (PLANSPONSOR.com) – A federal judge has determined participants in the Federal National Mortgage Association’s (FNMA) Employee Stock Ownership Plan (ESOP) can move forward with a lawsuit concerning company stock investments.
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U.S. District Judge Paul A. Crotty of the U.S. District Court for the Southern District of New York said the plaintiffs plausibly alleged that defendants named in the lawsuit knew both the causes of the price drop of FNMA stock and the reasons it was imprudent to retain the plan’s investment in FNMA stock. The plaintiffs argued that the defendants knew or should have known of external warnings indicating dire circumstances, including: the growing rate of foreclosures as reported by FNMA itself; concerns about the viability of the housing market; regulators’ concerns about lessened underwriting standards; claims that the housing bubble had “burst” and there would be further deterioration; and commentary regarding the prudence of FNMA’s increasing participation in the subprime market.   

The plaintiffs also alleged FNMA’s risk control officers issued internal warnings. Crotty found that the defendants knew of FNMA’s publicly disclosed deteriorating financial condition. FNMA itself was disclosing facts pertinent to the market-wide decline. Defendants also must have been aware of the decline in the value of the plan’s assets, which fell from approximately $116 million to $85 million in 2007 and dropped to $17.5 million by April 2008. By December 31, 2008, the plan’s assets were valued at approximately $1.29 million.   

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The benefit plan committee defendants argued that they cannot be found liable for a breach of their duty of prudence because divesting the plan’s assets of FNMA’s stock would involve trading on insider information; alternatively, disclosure of non-public information before divesting would have caused the very decline in stock price that plaintiffs sought to avoid. Crotty noted that this argument has been “regularly rejected … as a justification for avoiding fiduciary duties under ERISA.” Citing a previous court ruling, Crotty said defendants could have “taken a variety of steps that would not have been violations of the securities laws, including independently evaluating the prudence of the maintenance of the [company] stock fund as an investment option under the plans, ceasing new investments in the [company] stock fund, questioning the valuation of in-kind stock contributions to the plans, [or] considering whether public disclosure of material information would have been in the best interests of the plans’ participants … .”  

Crotty denied FNMA’s motion to dismiss the suit; however, he did dismiss claims against director defendants who became board members after FNMA was place into conservatorship.  

The opinion in In Re Fannie Mae 2008 ERISA Litigation is here.
Benefits October 23, 2012

Most Impressive Job Seeker Tactics

October 23, 2012 (PLANSPONSOR.com) – Office Team asked Human Resources managers to recount the most impressive action they have seen or heard an individual take to try to land a position.
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Some job seekers did a little show and tell:

  • “I recall applicants who have impressed me with their overall marketing approach. A few have sent in fancy CDs that contained a video message explaining why they should get the job.”
  • “Someone applying for a position as a car detailer brought in his own vehicle to demonstrate his skills.”
  • “I was impressed by a candidate who prepared an elaborate online portfolio and presentation.”
  • “One woman showed up with, literally, a suitcase full of binders containing letters of reference, certificates of achievement and other accolades.”
  • “A job seeker brought in a performance review from his past employer.”
  • “The most impressive thing to me is a creative resume.”

 

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Some shined with the tried and true traditional approaches: 

  • “One applicant explained what he knew about our company. I was very impressed with his knowledge and research.”
  • “I had a follow-up email from a candidate immediately after our meeting.”
  • “I liked the way one job seeker explained his skills in a way that correlated directly to what we needed for the position.”
  • “A candidate gave me a thank-you note right after the interview.”
  • “One woman didn’t just recite her skills—she provided many examples of her work.”
  • “The candidates I recall most are the ones who were persistent in calling to make sure they got the position.”
  • “An entry-level job applicant arrived for the interview in a three-piece suit.”
  • “I am impressed when a job seeker arrives on time and is well-dressed. It’s that simple.”
  • “The most impressive thing to me in any applicant is honesty.”

Other responses included:

  • “An applicant walked in with coffee and donuts, and her resume underneath.”
  • “I've had someone outline what he planned to do for the company in his first six months.”
  • “One job seeker sent a handmade get well card when she heard the hiring manager was under the weather.”
  • “I've had people offer to work for free.”
  • “I recall someone who travelled a great distance just to be interviewed.”
  • “One applicant sent a gift and an invitation to coffee.”
  • “We had a candidate who contacted our board of directors to try to make his case for being hired.”

 

The survey was developed by OfficeTeam, conducted by an independent research firm, and is based on telephone interviews with more than 650 HR managers at companies with 20 or more employees in the United States and Canada.

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