Law firm Zamansky LLC has begun an investigation of IBM’s 401(k) plan for its employees under allegations of ERISA violations. The duty of prudent management of plan assets was potentially violated through IBM’s continued offering of its company stock despite alleged knowledge of an artificially inflated share price. A class action lawsuit was filed on April 1, 2015 alleging that IBM over-valued and materially misrepresented its microelectronics business to investors from January 22 through October 17, 2014.
IBM was seeking to sell this business unit, which IBM certified was worth $2.4 billion, when in fact the business was not worth that amount, having lost $700 million the year prior, with expectation of losses in 2014. On October 20, 2014, IBM announced that it was taking a $4.7 billion charge and write-off of the microelectronics business unit, in connection with the sale of the unit. IBM’s stock price subsequently declined by $20+ per share.
Former and existing IBM employees who purchased and held IBM stock within the IBM 401(k) Plan since January 22, 2014 have suffered commensurate losses to their 401(k) account balances. The lawsuit claims that IBM management was aware that financial statements overstated the business unit’s value and intentionally hid the business struggles from investors.
planadviser.com; May 7, 2015.