Tuesday, 18 March 2008

Bear Sterns & self-investment

Interesting to see that Bear Sterns is already the subject of legal interest. In this case the focus is on whether the employee savings plan was inappropriately invested in the company's own stock. Unfortunately, despite the lesson of Enron, it seems that some companies still stuff 401k plans full of their own stock rather than a properly diversified portfolio.

Bear Stearns faces lawsuit over employee share plan

Move adds to pressure from other investors over cut-price bail-out.

SEATTLE (Thomson IM) - Law firm Keller Rohrback LLP said it has commenced investigations against Bear Stearns Companies Inc for potential violations of the Employee Retirement Income Security Act of 1974, focusing on investments in Bear Stearns stock by the bank's employee stock ownership plan.

A breach may have occurred if the fiduciaries failed to manage the assets of the plan prudently and loyally by investing the assets in company stock when it was no longer a prudent investment for participants' retirement savings.

Specifically, the law firm claims, Bear Stearns and the plan's other fiduciaries continued to invest in and hold Bear Stearns stock in the plan despite the company's apparent mismanagement of the risk of assets held by it and its failure to maintain adequate capital and liquidity.

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