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Benefits July 19, 2004
Class Action Sought on Bankrupt Stock Investment
July 19, 2004 (PLANSPONSOR.com) - A plan participant
is seeking class action status for a company stock
investment-based suit, for losses incurred in a fund in which
participants had the ability to leave at any time.
Reported by Nevin E. Adams
The complaint alleges that the defendants – which include Atlanta-based Southern Co., Southern Co. Services, Inc., the Employee Savings Plan Committee, the Pension Fund Investment Review Committee, certain current and former members of those committees, and Merrill Lynch Trust Co. – breached their fiduciary duties under the Employee Retirement Income Security Act (ERISA) by failing to investigate whether now-bankrupt Mirant’s stock was an appropriate investment option for the plan. The suit also alleges that the defendants failed to inform plan participants that Mirant stock was not an appropriate investment for their retirement assets based on Mirant’s alleged improper energy trading and accounting practices and mismanagement, according to the Atlanta Business Chronicle.
The plan, one of several retirement plans that Southern Co. provides, allows participants to direct the investment of their plan account balances into various available investment options (including Southern Co. common stock).
Spin-Off Circumstances
After Atlanta-based Mirant’s spin-off on April 2, 2001, all holders of Southern Co. common stock, including any plan participants, received Mirant common stock as a dividend. The Mirant stock received by plan participants was held by the plan’s trust in a “Mirant Stock Fund.” Mirant filed for Chapter 11 bankruptcy protection on July 14, 2003.
The plan gave participants five years from the date of the spin-off to transfer funds out of the Mirant Stock Fund at anytime of their choosing into another plan fund. Plan participants were not permitted to make any additional investment in the Mirant Stock Fund or to later reinvest funds in the Mirant Stock Fund that were previously transferred out of that Fund.
The case was filed June 30 in the U.S. District Court for the Northern District of Georgia, according to a Form 8-K filed Friday with the Securities and Exchange Commission.Southern Co. said it denies any wrongdoing and intends to defend this action vigorously.