Compliance June 22, 2007

Two Firms Face ERISA Suits over Stock Plan Administration

June 22, 2007 (PLANSPONSOR.com) - Law firms have announced investigations into possible fiduciary breaches under the Employee Retirement Income Security Act (ERISA) involving the administration of retirement plans of Sterling Financial Corp. and Fremont General Corporation which hold company stock.
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According to the announcement from New York law firm Harwood Feffer LLP, the investigation of Sterling Financial focuses on whether the company and certain plan administrators breached their fiduciary duties of loyalty and prudence to the plan’s participants and beneficiaries under ERISA by:

  • offering and/or continuing to hold company stock as an investment when it was not prudent to do so;
  • withholding or concealing material information from plan participants and beneficiaries concerning their investments; and
  • failing to properly monitor the Plan’s administration and management.

Harwood Feffer intends to pursue an action on behalf of the plan’s participants and beneficiaries harmed by such conduct.

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The law firm said on April 30, 2007, Sterling Financial announced that in an internal investigation the company had received information suggesting “irregularities in certain financing contracts” at Equipment Finance LLC (“EFI”). As a result, Sterling Financial expected to restate financial statements for the years 2004 through 2006.

According to the announcement, on May 24, 2007, Sterling Financial announced that the “previously reported irregularities” at EFI were a “direct result of collusion” by certain EFI employees. The company stated that as a result, it expects to record a cumulative after-tax charge to the December 31, 2006 financial statements of approximately $145 million to $165 million.

A number of class actions have already been filed on behalf of purchasers of the publicly traded shares of Sterling Financial alleging violations of the Securities Exchange Act of 1934 and Rule 10b-5, according to Harwood Feffer.

Concerning Fremont General Corporation, the law firm of Milberg Weiss & Bershad LLP announced it is investigating whether certain fiduciaries of the Fremont General Corporation Employee Stock Ownership Plan and the Fremont General Corporation and Affiliated Companies Investment Incentive Plan may have violated the ERISA by allowing participants to invest in Fremont common stock when it was not prudent to do so, and by failing to disclose Fremont’s management problems and unsound business practices.

Participants in the Sterling Financial plan can contact Jeffrey M. Norton, Esq. at Harwood Feffer LLP by calling (877) 935-7400 (ext. 286) or emailing jnorton@hfesq.com .

Participants in either or both Fremont plans may contact Milberg Weiss at (800) 320-5081 or by emailing dsclafani@milbergweiss.com or jjoseph@milbergweiss.com .

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