ST. LOUIS--(BUSINESS WIRE)--
Schlichter, Bogard & Denton of St. Louis, MO, today filed a class action lawsuit on behalf of employee participants in the defined contribution retirement Plans of Novant Health Inc., of Winston-Salem, North Carolina. Karolyn Kruger, M.D. et al., v. Novant Health Inc., et al., Case No. 14-208, was filed in the U.S. District Court, Middle District of North Carolina.
The complaint, which also named Novant’s Administrative and Retirement Plan Committees as defendants, alleges that Novant breached its fiduciary duties by causing the Plan participants to pay millions of dollars in excessive recordkeeping and administrative services fees to third party service providers. In addition, the complaint alleges breaches of fiduciary duties resulting from Novant’s decision to invest in imprudent investment options. These breaches resulted in substantially reducing the retirement assets of the Plan participants.
The complaint also alleges that the Novant defendants consistently and fraudulently concealed their breaches, and the breaches of others by, in part, informing Plan participants that they were not paying certain fees for the Plan, but that Novant paid.
Jerry Schlichter of Schlichter, Bogard & Denton, the attorney for the Novant plaintiffs stated: “We allege that Novant has breached its fiduciary duty under the law, a duty designed to ensure that fees charged to its employees and retirees are reasonable, that prudence is used in selecting and monitoring investment options, and that conflicts of interest and self-dealing are avoided. It has failed in that duty.”
All six Plaintiffs in the complaint are residents of North Carolina and current or former employees of Novant.
The complaint states that Great-West Life & Annuity Insurance Company, an administrative and recordkeeping service provider for the Plan, received excessive compensation of approximately $8.6 million between 2009-2012. Additional payments received by Great-West from the investment companies of the Plan’s investment options constitute “kick-backs”, according to the complaint, also referred to as revenue sharing. This provided Great-West with an additional source of revenue from the Plan participants’ accounts.
The complaint also implicates D.L. Davis & Company, which is based in Winston-Salem, NC, and is a brokerage company that provides the Plan with limited marketing and enrollment services. The complaint states that D.L. Davis, under CEO and President Derrick L. Davis, was paid excessive fees up to $9.6 million between 2009-2012 in the form of “commissions” by the Plan. The complaint states that D.L. Davis also received a second source of revenue in the form of “kick-backs” from the managers of the Plan investment options. D.L. Davis is a registered broker of MML Investors Services, a subsidiary of the Massachusetts Mutual Life Insurance Co.
Derrick Davis has had a long-term, ongoing relationship with Novant since 1996. The complaint details that Mr. Davis, through other corporate entities he owns or controls, has entered into a variety of land development projects and office building leasing arrangements in the greater-Winston-Salem area with Novant.
The complaint also highlights that early in Mr. Davis’ business relationship with Novant he made a charitable gift to Novant in excess of $5 million. In addition, at nearly the same time as Mr. Davis gave Novant that $5 million, a Davis-owned development company in which he is an officer, manager and/or owner, East Coast Capital, announced plans to develop the Southeast Gateway project. The project included Novant Health as occupying 40,000 square feet of this office development for a call center.
Novant’s retirement program consists of approximately 25,000 participants with total assets of approximately $1.2 billion. Novant offers its employees and retirees an ERISA-ruled retirement program known as the Retirement Plus Plan. The program includes two Plans, the Tax Deferred Savings Plan of Novant Health Inc., and the Savings Supplement Retirement Plan of Novant Health Inc.
Schlichter, Bogard & Denton, based in St. Louis, MO, pioneered defined contribution 401(k) litigation against corporate plan sponsors as it has sought to recover excessive fees charged to plan participants and to seek remedies for a range of other breaches of ERISA. Since 2006, the firm has filed twelve such complaints and secured six settlements on behalf of employees securing over $125 million for plaintiffs. It has pending cases today against Ameriprise, Lockheed Martin, Northrup Grumman and Mass Mutual. In 2009, the firm won the only 401(k) excessive fee litigation matter to be taken to trial. The defendants in that case were ABB and Fidelity.
Schlichter, Bogard & Denton’s work encouraged the Department of Labor to institute regulatory changes that have required greater transparency into fees being charged to defined contribution 401(k) plan participants. Numerous commentators and courts have noted the firm’s work has caused 401(k) fees to be lowered throughout the country.
About Schlichter, Bogard & Denton, LLP
Schlichter, Bogard & Denton, LLP, of St. Louis, MO, is a national law firm that represents individuals, including 401(k) plan investors, whose plans suffer from excessive fees or imprudent investment options. Its attorneys are dedicated to helping employees and retirees secure the retirement benefits they deserve.
More information can be found at: www.uselaws.com or call (314) 621-6115.
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Montieth Illingworth, 212-284-7625