Terex Corp., a Connecticut-based manufacturer of construction, transportation and mining equipment, has agreed to settle a class-action claim by participants in its 401(k) plan for $2.5 million, according to court documents.
Plaintiffs alleged that the company artificially inflated its stock price between December 31, 2007 and February 27, 2009 by not fully disclosing the impact the collapse in real estate and the subsequent subprime mortgage crisis was having on the manufacturer's profits.
About 6,000 participants were enrolled in the plan in 2007, according to the company's Form 5500 filing.
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Court documents did not disclose how many participants held company stock in their retirement accounts. Terex's 2009 11K filing with the Securities and Exchange Commission show the plan held about $323 million in assets at the end of 2007. About $91.5 million, or 28 percent of the assets, was held in company stock.
During 2008, the value of company stock depreciated about $69 million.
"Plan fiduciaries did little, if anything, to protect the participants as the company's problems snowballed and as the company's stock price plummeted," alleged the plaintiffs in court documents.
The plaintiffs also claimed that company fiduciaries were motivated by conflicts of interest, as they too held company stock.
That conflict "crippled their ability to function as independent, single-minded fiduciaries," according to court documents.
In February 2009, the company took a $459.9 million "impairment" charge on company assets that had previously been overvalued.
That proved that Terex stock was not a prudent investment for participants during the class period, and that fiduciaries failed to monitor the plan and adjust menu offerings accordingly, according to the plaintiffs complaint.
The settlement was approved in U.S District Court for the District of Connecticut.
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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.
