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Benefits April 27, 2007
Fremont Employees File Suit Over ESOP and Retirement Plan Losses
April 27, 2007 (PLANSPONSOR.COM) - Employees of
Fremont General Corp. are suing the mortgage lender on
charges that nine company directors engaged in lending
practices that were unsafe and should have acted to prevent
the loss of millions of dollars from retirement and stock
ownership plans, the Associated Press reported.
Reported by Adrien Martin
The employees filing the lawsuit in the U.S. District
Court in Los Angeles are seeking class action status to
stand for 3,300 participants in the company retirement plan
and another 1,700 of those invested in the Employee Stock
Ownership Plan (ESOP).
According to the AP, the complaint alleges that directors
at the company began engaging in irresponsible lending
practices as early as 2003 in an effort to boost the
company’s stock – a plan that backfired when a large number
of subprime borrowers began to default on their loans.
In fact, Fremont had to exit the subprime mortgage
business in March after federal regulators alleged that one
of the company’s subsidiaries was making loans without
assessing borrowers’ ability to repay the loans.
When that happened, employees who had money in company
stock ownership and plans lost millions. According to the
complaint, the directors at the company should have been
aware that company stock was not a good investment.