The Department of Labor has brought suit against the fiduciaries to two defined contribution plans sponsored by West Virginia-based steelmaker Severstal Wheeling Inc., alleging that imprudent investments resulted in a $7 million loss to participants.
The fiduciaries in the case were identified as Michael DiClemente and Dennis Halpin, both members of Severstal's investment committee, and Ronald LaBow, principal of WPN Corp., Severstal's outside advisor to the plans.
Severstal, based in Wheeling, West Virginia, itself filed suit against WPN and LaBow in February of 2010 in New York.
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According to both suits, the outside advisor allegedly failed to properly diversify assets when one trust was separated from another.
In November of 2008, after WPN was named the investment manager to the two Severstal plans, one investment account with Neuberger Berman was comprised almost entirely of energy stocks.
LaBow and WPN liquidated the Neuberger Berman assets on March 24, 2009, and let the cash sit for nearly two months, by which time Severstal, and the DOL, allege the assets lost value.
The DOL's suit, which resulted from an Employee Benefits Security Administration investigation, alleges that Severstal was complicit in the imprudent investment of assets, and that the company's fiduciaries failed to properly oversee the plans and monitor the decisions of LaBow and WPN.
Beyond the $7 million the DOL is seeking, regulators also requested that Severstal's retirement committee be removed as fiduciaries to the plans, and to have an independent fiduciary with authority to manage the plans appointed by the court.
The company was once a part of the North American operations of Russian steel giant Severstal and makes cold- and hot-rolled sheet steel and coated steel products. Its various plants are now owned by other interests.
"This case underscores the department's commitment to hold fiduciaries accountable when we believe they have failed to meet their obligation to protect plan assets," said Assistant Secretary of Labor Phyllis Borzi.
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Nick Thornton
Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.
