An investment manager and plan administrator were ordered to pay $15 million for failing to diversify plan assets.
Investment manager WPN Corp. and Ronald LaBow, plan administrator and former president of Wheeling, Inc., were ordered last week to pay $15 million to two plans of Severstal Wheeling Inc. for failing to diversify plan assets between November 2008 and May 2009. In the case, brought by the Severstal Wheeling Inc. Retirement Committee, U.S. District Court Judge Laura Taylor Swain of the U.S. District Court for the Southern District of New York, cited the defendants’ “near-total dereliction of their duties” under the investment management agreement.
The court ordered disgorgement of $9,710,438, plus $5,305,889.74 as prejudgment interest for the period from July 16, 2009, to Aug. 10, 2015, for a total judgment of $15,016,327.74. The $9.6 million represented the net differential between the actual performance of the Severstal Trust and the performance that the court said “…could have been achieved during the relevant period had the Severstal Trust been invested in the same manner as the Combined Trust.”
The two plans involved, Wheeling Corrugating Co. Retirement Security Plan and Salaried Employees' Pension Plan of Severstal Wheeling Inc., had $38 million in assets at the time, consisting mostly of large-cap energy stocks.
Late last year the Labor Department brought suit against fiduciaries of the plans, claiming that their actions (or lack thereof) “caused the plans to sustain losses and lost earnings in excess of $7 million.”
That investigation found that from Nov. 3, 2008, through May 19, 2009, the plans’ assets were imprudently invested by the plans’ fiduciaries, including Severstal Wheeling Inc. Retirement Committee, specifically committee members Michael DiClemente and Dennis Halpin, and WPN Corp. and its owner Ronald LaBow, who had been hired as the plans’ investment manager. The suit also alleges that the Retirement Committee and its members failed to properly oversee the plans and monitor the actions taken by WPN and LaBow.
