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Litigation concerning excessive administrative fees charged to employees by their 401(k) plans is heating up and adding a new twist. The suits come amid stepped-up investigations by a congressional committee, the U.S. Department of Labor and the U.S. Securities and Exchange Commission into inadequate disclosures of administrative fees charged to employees in 401(k) and other retirement plans. While the first round of suits has focused on undisclosed fees charged for mutual funds, more recent suits focus on those charged for annuities. And still others challenge the prudence of employers that invest in funds that charge high fees � even if they’re fully disclosed to employees. Since September, St. Louis-based Schlichter, Bogard & Denton has filed 13 class actions alleging that several of the nation’s largest companies with defined contribution retirement plans, such as 401(k)s, breached their fiduciary duties by allowing third parties to charge undisclosed fees to employees who participate in the plans. The suits, filed under the Employee Retirement Income Security Act of 1974 (ERISA), claim that the fees are “excessive” or “unreasonable,” and are tied to “revenue sharing” arrangements among companies involved in the 401(k) plans. Schlichter Bogard sued major corporations including The Boeing Co., Kraft Foods Inc. and Bechtel Group Inc., many of which have brought unsuccessful motions to dismiss in recent months. Meanwhile, lawyers at different firms have filed similar suits against some of the same companies. Other suits, as in a case against ING Life Insurance & Annuity Co., have asserted excessive-fee allegations against funds offering annuities, rather than mutual funds. And two cases against General Motors Corp., and a case against Radio Shack Corp., have focused less on the disclosure of fees and more on whether funds with high fees are the best option for employees. A claim for excessive fees in 401(k) plans is “like the newest toy in the toy box” for the plaintiffs’ bar, said Gregory Ash, a partner in Kansas City, Mo.-based Spencer Fane Britt & Browne’s Overland Park, Kan., office who is defending companies against such suits. “They are adding these types of claims to other lawsuits where we wouldn’t have expected to otherwise see them,” Ash said. But Lynn Sarko, managing partner of Keller Rohrback in Seattle, which filed its first 401(k) fee suit in March, said: “This is a real area with real offenses, and there will be a great number of suits that are filed in the next few years.” Last fall, the U.S. Government Accountability Office issued a report finding that a growing number of mutual fund companies fail to clearly disclose the administrative fees charged to employees in 401(k) and other retirement plans. In March, financial experts testified before a congressional committee that mutual fund companies overcharged employees billions of dollars in 401(k) fees. And the Department of Labor, which oversees 401(k) plans, is working with the Securities and Exchange Commission on new rules that would provide better disclosures. Meanwhile, most of the suits filed by Schlichter Bogard have survived the initial rulings on motions to dismiss. Federal judges in three cases refused to dismiss claims against Kraft, Boeing and Bechtel. George v. Kraft, No. 06-cv-00798 (S.D. Ill.); Spano v. Boeing, No. 3:06-cv-00743 (S.D. Ill.); and Kanawi v. Bechtel, No. 3:06-cv-05566 (N.D. Calif.). On April 17, the judge in the Boeing case said he needed more information to decide breach of fiduciary duty claims. “The court thinks that these claims are too complicated and fact-specific to be decided on a motion to dismiss,” said Tom Wack, a partner in the St. Louis office of Bryan Cave, who represents Boeing. A federal judge in the Bechtel case came to similar conclusions in his May 15 ruling, rejecting a motion to dismiss. Nicole Diller, a partner in the San Francisco office of Morgan, Lewis & Bockius who represents Bechtel, did not return calls seeking comment. “The rulings are consistent with what we have felt all along: that these cases represent valid legal theories for breach of fiduciary duty under ERISA,” said Jerome Schlichter, founding partner of Schlichter Bogard. Some of the Schlichter suits have hit roadblocks, however. In a case against Exelon Corp., a federal judge in February dismissed claims that excessive fees in a 401(k) plan caused investor losses. Loomis v. Exelon, No. 1:06-cv-04900 (N.D. Ill.). Mark Blocker of Sidley Austin, who represents Exelon, declined to comment. A federal judge dismissed some of the defendants, including the board of directors, in a suit against Northrop Grumman Corp. on May 21. Waldbuesser v. Northrop Grumman, No. 06-06213 (C.D. Calif.). Other plaintiffs’ firms are also getting into the act by filing 401(k) fee suits. Daniel Keller, a partner in the New York office of Agoura Hills, Calif.-based Keller, Fishback & Jackson, filed a 401(k) fees suit in January against Northrop. Stephen J. Fearon, a partner at New York’s Squitieri & Fearon, filed a 401(k) fees suit against Kraft in April. Schlichter said other lawyers “basically verbatim-copied our complaints.” Yet some suits involving 401(k) fees allegations have differed from those filed by Schlichter Bogard. Keller Rohrback filed its first 401(k) fee lawsuit in March against ING. Keller lists on its Web site more than 15 investigations its lawyers are conducting of investment providers and employers who sponsor plans with alleged excessive 401(k) fees. Keller Rohrback’s Sarko said he expects the firm to file more cases in the next few months. The ING case concerns variable annuities offered to members of the New York State United Teachers union as retirement investments. Montoya v. ING Life Insurance & Annuity Co., No. 1:07-cv-02574 (S.D.N.Y). The suit follows a $30 million settlement last year between ING and the New York Attorney General’s Office. Markham Leventhal, a partner in the Miami office of Washington-based Jorden Burt, who represents ING, did not return calls seeking comment. Another plaintiffs’ firm, Washington-based McTigue & Porter, filed a pair of suits against General Motors Investment Management Corp. Brewer v. General Motors Investment Management Corp., No. 1:2007cv02928; Young v. General Motors Investment Management Corp., No. 1:07cv01994 (S.D.N.Y). Name partner Greg Porter said the complaints focus not on whether the fees were disclosed but whether the fiduciaries did their due diligence in selecting the investment options they made available to participants. He said he expects to file more suits in this area. Melisa Tezanos, a spokeswoman for General Motors, said the company “believes the allegations are without merit and intends to vigorously defend against them.”

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