Skip to main content

You are here


ERISA Investigation Focuses on Fund’s Composition

It’s not yet litigation, but a legal investigation could be laying the groundwork for a different twist on ERISA litigation.

While the New York-based law firm of Zamansky LLC has described it as an investigation, rather than an actual litigation, a press release notes that it is looking for “potential violations” of ERISA, specifically whether the plan fiduciaries violated their duties to prudently manage and invest plan assets “by the continued offering of the Sequoia Fund as an investment option” in the plan.

These type investigations are often a prelude to, and a means of gathering interest in, class action lawsuits based on the investigation findings.

According to a press release announcing the investigation, on Jan. 8, 2016, a shareholder derivative lawsuit was filed against the Sequoia Fund’s investment managers and its board of directors, alleging that, “in March 2015 and afterwards, the Sequoia Fund’s investment strategy outlined in its prospectus was violated by its large stake in Valeant Pharmaceuticals.” The complaint alleges that the Sequoia Fund’s 25% limit on concentration in any one position was violated by its approximately 35% investment in Valeant, and further that the Sequoia Fund’s managers violated its “sell strategy” by failing to sell Valeant when its valuation became “excessive in relation to its expected earnings,” and that Valeant’s $236 per share price was 100 times its 2014 earnings.

Zamansky notes that in the Sequoia fund, in its 2015 annual report, stated to investors that its “credibility as investors” had been bruised by the controversy around Valeant, and that the fund had experienced “higher-than-normal redemptions,” two shareholder lawsuits and the resignation of two out of five independent directors. Further, that the fund’s “high concentration in a speculative stock such as Valeant Pharmaceuticals raises serious issues over the prudent monitoring and oversight” and that “Disney’s employees who purchased and held the Sequoia Fund through the Plan since at least 2014, may have suffered losses to their retirement savings.”

The press release closes with an entreaty for Disney employees who might have been injured to contact the law firm.