Fee Suit: Citigroup breached its fiduciary duty when it invested employee
401(k) money with company subsidiaries and affiliates that generated revenues
for Citigroup at greater cost to investors, a lawsuit alleges.
The suit, filed by in federal court in New York by Marya Leber, one of the
401(k) plan participants, alleges that the company invested in mutual funds
managed by subsidiaries Smith Barney and Salomon Bros., where the company would
generate fee-based revenue, rather than choosing “better performing, lower-fee
mutual funds that Committee Defendants could have chosen—and did eventually
choose after Citigroup sold its mutual fund business and no longer received
revenue from the 401(k) plan.”
The suit, which is seeking class-action status, charges that under the
Employee Retirement Income Security Act, Citigroup violated its responsibility
to manage the plan solely in the participants’ interest. The suit alleges that
the plan incurred millions of dollars in losses because of decisions to invest
billions of dollars in affiliated funds “which resulted in millions of dollars
of revenue for Citigroup while delivering poor investment returns for the 401(k)
plan.” It asks that Citigroup return to the plan all the fees it received, as
well as unspecified restitution.
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