v - American Benefits Council

MaryL. Perry- #175911
[email protected]
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IINTTED STATES DTSTRTCTCOURT DTSTRTCT
NORTTmRN DTSTRTCTOT,CALTFORNTA
,
BeverlyKanawi; Zoltan Inczeand )
Satvador
Aquinoas
)
{
C
06
;'ffi11il:;.:?;;:il1.
b5G6
i
on behalf of the plan,
l
)
)
Plaintiffs;
CRB
cause
No:
)
)
l
v-;
BechtelCorporation,The Bechtel
Trust andThrift Plan
AdministrariveCommittee,
PeggiKnox andPatDamsguard,
Defendants
.
)
)
)
)
)
)
)
JURY TRIAL
DEMANDED ON ALL
COUNTS AND ISSUESSO
TRIABLE
CLASSACTTOI!
COMPLAINT/
CLASSACTION
INTRODUCTION
l.
Personalsavingsaccounts,such as 40l(k)s, are quickly becoming
employees'primary method of financially planning for retirement. Al increasing
number of companiesrecently haveamounced the termination of traditional defined
benefit pensionplans and their replacementby defined contribution 401(k) plans. For
many employeesin the United Statestoday, an employer-provideddefined benefit
pension awaiting their retirementis a quaint, historical notion.
2.
In 401(k) plans,employersprovide an opportunity for employeesto save
their own pre-tax dollars in individual 401(k) accounts. The accountsprovide a number
of investmentaltemativesinto which employeesplace a portion of their current income
with the hope of eaming, over time, a rehrm sufficient to supportthemselvesand their
families in retirement.
3.
Accordingly, in 401(k) plans, the retum on employees'investmentsis
critical. Even seemingly small reductionsin a participant's retum in one year may
substantiallyimpair his or her accumulatedsavingsat retirement.
4-
while such reductionsin 401(k) accounts'retums may resurtfrom market
fluctuations,a consistent- albeit rarely discussed- force reducing401(k) accounts'
earningsis the administrativefees and expensesassessedagainstaccountbalances.
5.
The most certain meansof increasingthe retum on employees'401(k)
savingsis to reducethe feesand expensesemployeespay from their 401(k) accounts.
6.
Unlike generalizedmarket fluctuations,employerscan control thesefees
and expenses.Federallaw requiresthem to do so.
COMPLAINT/
CLASSACTION
7.
Underthe EmployeeRetirementIncomeSecurityActof 1974,29U.S.C.
$ l00l et seq.('ERISA), an employerwho providesa 401(k)plan for its employeesis a
'?lan Sponsor."
The employeror its agentmay alsoserveas',planAdministrator,"or
theemployermayappointa third partyto serveassuch. Both theplan sponsorandthe
PlanAdministratorarefiduciariesof the401(k)plan. The planAdministratorperforms
or contractsfor administrative,
record-keeping,
investmentmanagement,
andother
servicesfrom entitiesin thefinancialandretirementindustry. ERISArequiresthatthe
feesfor theseservicesmustbereasonable,
incurredsolelyfor the benefitofplan
participants,
andfully disclosed.
8.
Forprovidingvariousservices,third_partyplanadministrators,
record_
keepers,consultants,
investrnent
managers,
andothervendorsin the401(k)industryhave
developeda varietyofpricing andfeestructures.
9.
At best,thesefeestructures
arecomplicatedandconfusingwhen
disclosedto Planparticipants.At worst,theyareexcessive,
undisclosed,
andillegal.
10.
In this action, pursuantto ERISA g 502(a),29 U.S.C.g ll32(a),
Plaintiffs and ClassRepresenlatives
Beverly Kanawi, zoltan lncze,andsalavador
Aquino' on behalfof the Bechtelrrust andrhrift plan,pranNo. 001 (he ..plan.)and
similarlysituatedparticipantsandbeneficiaries
in the plan,seekto recoverthe losses
sufferedby the Planandto obtaininjunctiveandotherequitablerelief for the plan from
Bechtelcorporation("Bechtel"),the plan sponsor,andthe Bechtelrrust andrhrift plan
Administrativecommittee,the planAdministrator(the"committee"),andother
defendants
identifiedbelow(collectively"Defendants")baseduponbreaches
oftheir
frduciaryduties.
COMPLAINT/
CLASSACTION
11.
As set forth in detail below, the fees and expensespaid by the plan, and
thus borne by Plan participants,were and are urueasonableand excessive;not incuned
solely for the benefit ofthe Plan and its participants;and undisclosedto participants. By
subjectingthe Plan and its participantsto theseexcessivefees and expenses,and by other
conduct set forth below, Defendantsviolated their fiduciary obligations under ERISA.
PARTIES, JURISIDCTION AND VENUE
Plaintiffs
12.
Plaintiffand ClassRepresentativeBeverly Kanawi is a residentofOcean
Side, Califomia.
13.
Plaintiffand ClassRepresentativeZnltan Incze is a residentof Etwater,
Califomia.
14.
Plaintiff and ClassRepresentativeSalvadorAquino is a residentofUnion
City, Califomia.
15.
Each Plaintiff and Class Representativeis a participant in the plan.
Defendants
16.
DefendantBechtel Corporation is a privately-held Califomia corporation
with its headquartersin san Francisco, califomia and at least forty offices and facilities
located throughout the United Statesand around the world.
17.
Bechtel Corporationdescribesitselfas "one ofthe world's premier
engineering,construction,and project managementcompanies,"with revenuesof more
than $18 billion in 2005. Bechtel is currently involved in Boston's,,Big Dig" highway
reconstructionproject. According to its website, "Bechtel has completedmore than
22,000 projects in 140 countries,including Hoover Dam, the ChannelTururel,Hong
COMPLAINT/
CLASSACTION
Kong InternationalAirport, the San FranciscoBay Area Rapid Transit (BART) system,
the reconstructionof Kuwait's oil fields after the Gulf War, Jubail industrial city, and the
Alma aluminum smelter." Bechtelprovides engineering,construction, and project
managementin areasincluding roadsand rail systems,airpoG and seaports,fossil and
nuclearpower plants, refineriesand petrochemicalfacilities, mines and smelters,defense
and aerospacefacilities, environmentalcleanup projects,telecommunicationsnetworks,
pipelinesand oil and gas field development.
18.
Bechtel is the Sponsorof the plan pursuantto EzuSA $ 3(l6XB).
19.
DefendantPeggiKnox is the principal Vice president of Retirementplans
ofBechtel corporation and the individual designatedby Bechtel to sign documentson
behalfof Bechtel as Plan Sponsor.
20.
DefendantBechtel Trust & Thrift Plan Administrative Committee (the
"committee") is the namedfiduciary and Administrator of the plan. Bechtel Corporatior.
appointsthe committee. The committee is comprisedof Bechtel officers and employees.
21.
DefendantPat Damsgaardis an officer and employeeofBechtel and the
individual designatedby Bechtelto sign documentsas plan Administrator.
Jurisdiction and Venue:
22.
JURISDICTION:
Plaintiffs bring this acrion pursuantto ERISA $$
502(a)(2)& (3),29 U.S.C. $ ll32(a)(2) & (3), which provides that participantsmay
pursuecivil actionson behalfofthe Plan to remedy breachesof fiduciary duty as set forth
in ERISA $ 409,29 U.S.C. $ I109, and to obtain other appropriateequitable relief. This
Court has federalquestionsubjectmatlerjurisdiction pursuanlto 28 U.S.C. g I 33 I and
2 9 U . S . c . l$l 3 2 ( e ) ( 1 ) .
COMPLAINT/
CLASSACTION
23.
All Defendants
aresubjectto serviceofprocessissuedfrom this Court
pursuant
to 29 U.S.C.g 1132(e)(l)(2).
24.
Venueis properin this Courtpursuantto 29 U.S.C.g 1132(e)(2)because
the Planis administered
in this district,the breaches
offiduciary duty giving riseto this
actionoccurredin this district,andthe Defendants
may be foundin this district.
25.
INTRADISTRJCT ASSIGNMENT: Venueis properin this divisionof
this Courtpursuantto LocalRules3-2(c)(d)and 3-5(b)in thata substantialpartof
Defendants'
actionsandomissionsout of which this actionarisesoccurredin San
FranciscoCounty,Califomia.
Rule 23 RequiresClassCertification:
26.
Plaintiffsbring this actionpursuantto Rule23 ofthe FederalRulesof
civil Procedure,
on behalfof themselves
andatl similarlysituatedplan participantsand
beneficiaries-Theyseekto represent
the followingclass(the.,Class,,):
All persons, excluding the Defendants and other individuals who
are or may be liable for the conduct described in this Complaint,
who are or were participantsor beneficiariesof the Plan and who
are, were or may have beenaffected by the conduct set forth in this
Complaint, as well as those who will become participants or
beneficiariesofthe Plan in the future.
27.
Certificationof this Classis properunderRule23(a)in that.
A. Numerosity. Themembersof the Classaresonumerousthatjoinder
of all membersis impracticable.Althoughthe Plaintiffsdo not know
the exactnumberof Classmembersasof thedateof filing, the plan's
publicdocuments
statethat,at theendof the 2004Planvear.there
were 16,563participantswith accountbalancesin the Plan.
COMPLAINT/
CLASSACTION
B. Commonality. Common issuesof fact and law predominateover any
issuesunique to individual Classmembers. Issuesthat are common to
all Class Members include,but are not limited to, whetherthe
Defendants:
i.
Chargedfeesand expensesto the Plan that are
unreasonableor not incurred solely for the benefit of plan
participants;
ll.
Caused the Plan to enter into agreementswith third-parties
that causedor allowed the Plan to pay feesand expenses
that were, or are uffeasonableor not incurredsolely for the
benefit of Plan participants;
lll.
Failed to monitor the feesand expensespaid by the Plan
and, by such failure, causedor allowed the Plan to pay fees
and expensesthat are unreasonableor not incurred solely
for the benefit of Plan participants;
lv-
Failed to inform themselvesof, and understand,.
the various
methodsby which vendorsin the 401(k), financial, and
retirementindustry collect paymentsand other revenues
from 401(k) plans;
Failed to establish,implemen! and follow proceduresto
properly and prudently determinewhetherthe fees and
expensespaid by the Plan were reasonableand incurred
solely for the benefit of Plan participants;
COMPLAINT/
CLASSACTION
vi.
Failed properly to inform, and/or discloseto, plan
participantsthe feesand expensesthat are, or have been,
paid by the Plan;
vii.
Failed to inform, or discloseto, plan participantsin proper
detail and clarity the transactionfeesand expensesthat
affect participants' accountsbalancesin connectionwith
the purchaseor sale of interestsin investmentaltematives;
viii. Breachedtheir fiduciary duties by failing to disclosethat
hidden and excessivefees were and are being assessed
againstPlan assetsand by failing to stop such hidden
excessivefees,
ix.
ln charging,causingto be chargedor paid, and faiting to
monitor the feesand expensesof the plan, failed to exercise
the care,skill, prudence,and diligence that a prudent
personwould when acting in like capacityand familiar
with such matters;
Causedor allowed fees and exp€nsesto be paid by the plan
for purposesother than those allowed by ERISA;
xi.
By the conductaboveor by other conduct set forth in this
Complaint, revealedin discovery,or proven at trial,
breachedtheir fiduciary and other ERISA-imposed
obligations to the Plan, Plan participantsand beneficiaries.
and membersof the Class;
xii.
Are liable to the plan and the Class for lossessufferedas a
result ofthe breachesoftheir breachedtheir fiduciary
duties and other ERISA-imposedobligations;and
xiii. Are responsibleto accountfor the assetsand transactionsof
the Plan and should be charged for any transactions and
paymentsfor which they cannot account.
C . Typicality. The claims brought by the plaintifls are typical of thoseof
the absentClass members,in that:
i.
The Defendantsowed the exact samefiduciary and other
ERISA-basedobligations to eachplan participantand
beneficiary and eachmember ofthe Class;
ii.
The Defendants'breachof thoseobligationsconstitutesa
breachto eachparticipantand beneficiaryand each
memberof the Class;
iii.
To the extent that thereare any differencesin Class
members'damages,suchdifferenceswould be a product of
simple mathematicsbasedupon accountbalancesin the
Plan. Such minimal and formulaic differencesare no
impediment to classcertification.
D. Adequacy of Representation. The plaintiffs are adequate
representatives
ofthe absentClassmembersand will protect such
absentClassmembers' interestsin this litigation. The plaintiffs do not
have any interestsantagonisticto the other classmembersnor do they
COMPLAINT/
CLASSACTTON
have any unique claims or defensesthat might underminethe efficient
resolutionof the Class' claims. Plaintiffs have retainedcomperent
counsel,versedin ERISA, classactions,and complex litigation.
28.
Classcertification is also appropriateunder Rule 23(b) and eachsubpartin
that:
A. Pursuantto Rule 23(b)( I )(A), in the absenceof certifrcation,there is a
risk of inconsistentadjudicationswith respectto individual class
members,'
B. Pursuantto Rule 23(b)(2), as set forth above,the Defendantshave
acted on grounds generally applicable to the Class as a whole: and
C. Pursuantto Rule 23(b)(3), as set forth above,common issuesof law
and fact predominateover any purely individual issuesand thus a class
action is superiorto any other method for adjudicating theseclaims.
l0
COMPLAINT/
CLASSACTION
FACTS APPLICABLE TO ALL COUNTS
The Plan
29.
As part of their compensationand benerrts,Bechteroffers certainof its
employees
theopportunityto participatein the plan. The plan is a.'definedcontribution
plan,"asdefinedin ERISA$ 3(34),29U.S.C.$ 1002(34),andcontainsor is partofan
"eligible individualaccountplan" underERISA g 407(dX3XA),29U.S.C.
$I 107(dx3xA). It is alsoa tax-qualifiedplan of thetypepopularlyknownasa "401(k)
plan."
30.
Bechtelbenefitsby providingthe pranto eligibleemproyees
in thatthe
opportunityto participateenhances
Bechtel'sability to recruitandretainqualified
personnel,fostersemployeeloyaltyandgoodwill,andentitlesBechtelto tax advantases
underthe IntemalRevenueCode.
31.
ThePlanwasestablished
by the TrustandThrift plan Document.which
wasrestatedasof Januaryl, 2003(the"plan Document').The plan operatesin
connectionwith a mastertrust.
32.
A "mastertrust" is a separate
trustentityestablished
by anemployeror
groupof relatedemployersto provideinvestrnent
andadministrative
servicesto a 40I(k)
planor plans. Plansponsors
andadministrators
generallyutilizemastertruststo
administermultiple401(k)plansfor an employeror related-employer
group(e.g.a
companyor relatedcompanies
thatmaintainsalariedandan hourlyemployeeplaru;plans
formerly sponsoredor administeredby a companythat the employerhasacquiredand/or
with whomtheemployerhasmerged;plansthatincludeonly employees
ofa bargaining
unit or who arerepresented
by a labororganization,
etc.).
ll
COMPLAINT/
CLASSACTION
33.
Through a mastertrust structure,several401(k) plans may invest in
common investmentoptions or funds offered in the mastertrust and may sharethe
servicesof mastertrust record-keepers,investmentmanagers,consultants,and other
serviceproviders. The fees incurredfor such servicestypically are allocatedamong
participatingplans basedupon eachplan's proportionateshareofthe assetsin the master
trust.
34.
Bechtel hasdesignedthe Plan, combinedwith the Becon Trust and Thrift
Plan (the "Becon Plan"), to be administeredthrough a MasterTrust (the ,.MasterTrust")
pursuantto a Master Trust Agreementeffective July l, 1985,betweenBechtel power
Corporationand BankersTrust Company,and, as ofAugust 1,2003, betweenBechtel
Corporationand StateStreetBank and Trust Company.
35.
The Master Trust Agreementis part of, and incorporatedinto, the plan
Document36.
The Plan's assetscompriseapproximately 99.97%o
of the assetsin the
Master Trust. The Becon Plan's assets,approximately,comprisethe remaining .032o.
37.
DeutscheBank Trust Company of America ("Deutsche,')was the trustee
of the Master Trust prior to August 1,2003. StateStreetBank & Trust Company (,.State
Street") is the Trusteeof the Master Trust and has beensince August l, 2003.
38.
According to the Plan's financial statementsfiled with the Departmentof
Labor, each year highly compensatedparticipants may contribute up to 15 percent and up
to 40 percentnon-highly compensatedemployeesmay contributeoftheir annual
compensation,as defined in the Plan. Participantsmay also contributearnounts
representingdistributions from other qualified defined benefit or contribution plans-
t2
COMPLAINT/
CLASSACTTON
Participantswill be eligible for contributionsfrom the Companyin the first full payroll
period following their completion of one year of service. Bechtel will match an amount
equal to 25 percentof the first 5 percentofthe compensationthat certain participants
contribute to the Plan. Additional amounts may be conaibuted at the option of the Board
of Directors ofBechtel Corporatior; including profit sharingcontributions.
39.
According to the Summary Plan Description (the,.SpD") and the plan
Document,Plan participantsare 100 percentvestedin their accountat all times, including
Bechtel's matching and discretionarycontribution portion; thus amountsare entirely nonforfeitable.
40.
According to the SPD and the Plan Document,eachparticipant's account
is creditedwith the participant's contributions,the participant'sshareof the companies'
matching and discretionarycontributions,and, ofcourse, eamingson the participant's
investments.
41.
Accordingto thePlan'sfinancialstatements
filed with the Department
of
Labor and materialssentto participants,uponenrollmentin the plan, participantsmay
direct their contritrutiors in one or more of the following investmentfi.mdoptions:
Conservative
AssetAllocationPortfolio,ModerateAssetAllocationportfolio,
AggressiveAssetAllocationPortfolio,StableValueFund,MoneyMarketFund,Bond
Fund,S&P 500IndexFund,U.S.LargeCapValueFund,U.S.LargeCapGrowthFund,
U.S. SmallCapCoreFundandtheIntemationalEquityFund.
42.
Accordingto thePlan'sfinancialstatements
filed with theDepartment
of
Laborandthe SPD,zet investmentincomefor eachFund,aseamed,togetherwith
l3
COMPLAINT/
CLASSACTION
realizedand umealizedgains and losses,are allocateddaily to participants,basedon their
accountbalances,and reinvested.
43.
According to the SPD and the plan Documents,upon termination,
retirement, death or disability, the participant or beneficiary may elect to receive a singlesum arnountequal to the value of funds allocatedto the participant's account,or to
rollover the accountbalanceto an Individual RetirementAccount or anotheroualified
retirementplan.
44-
According to the Plan Document,expensesofthe pran are paid bv Bechter
Corporation,the Plan, and the Master Trust.
45.
Pursuantto $ 6.01 of the plan Document,the Commiftee is the
Administrator and namedfrduciary of the plan as defined in ERISA
$402(a)(t). The
Plan Documentdelegatesto the Cornmitteea broadarray of powers:
6.02 POWERSOF THE COMMITTEE. TheCommineeshallexercise
all discretionaryauthority underthe Planexceptto the extentthat such
authority is delegatedto anotherfiduciary. The Commifteeshall have
thepowerandtheduty to takeall actionsandto makeall decisions
necessary
or properto carryout its responsibilities
underthe plan. All
determinations
of the Committeeasto anyquestioninvolvingits
responsibilities
underthe Plan,including,withoutlimitation,
interpretationof the Plan,or asto any discretionaryitemsto betaken
underthe Plan,shallbe solelyat thediscretionof the Committeeand
shallbefinal, conclusiveandbindingon all personsclaimingto have
any right or interestin or underthePlan.
The Committee'spowersanddutiesinclude,but arenot limitedto, full
discretionary
authorityto do thefollowing:
(a)
to determinetherightsof eligibilityof an Employeeto
participatein the Plan,andthevalueofa participant'sAccount
Balance:
(b)
to adoptrulesof administration
necessary
for theproper
andefficientadministration
of the plan:
COMPLAINT/
CLASSACTION
(c)
to construe and enforce the terms of the Plan and the rules
of administrationit adopts,including interpretationof the plan
documentsand documentsrelatedto the Plan's operation;
(d)
to direct the Trusteewith respectto the crediting and
chargingof the Trust Fund;
(e)
to review and renderdecisionswith respectto a claim for
(or denial of a claim for) a benefit under the plan:
(0
to fumish the Employers with information which the
Employersmay require for tax or other pulposes;
(g)
to engagethe servicesof agentswhom it may deem
advisableto assistit with the performanceof its duties;
(h)
to select,engage,evaluateand terminatethe servicesofan
"investment manager"or managers(as defined in ERISA $ 3(3g)),
each of whom will have full power and authority to manage, acquire or
dispose(or direct the Trusteewith respectto acquisition or disposition)
ofany Plan assetunder its control in accordancewith an agreement
entered into with the Committee;
(D
to provide for the payment ofall expenseswhich are
incuned in connection with the administration of the plan and the
investment ofthe Trust Fund from the Trust Fund to the full extent
permitted by applicable law and in accordance with the plan;
to appoint such committeeswith such powersand dutiesas
C)
it shall determineand other administrativepersonnelto act on behalf
of the Committee;
(k)
to correct errors to the extent feasible:
to determine the number and category of investment funds
0)
that will be offered under the Plan and to add and delete investment
funds; and
(m)
to take such other action as is appropriate in cormection
with administrationof the Plan.
Any appointmentpursuantto section 6.02O will cany with it the
full discretionary authority of the Committee with respectto the
delegatedpowers and duties unlessthe Committeeprovidesto the
contrary.
l5
COMPLAINT/
CLASS ACTION
46.
In.thePlanDocument,BechtelCorporationagreesto indemnifythe
CommitteeandcertainPlanfiduciaries:
6.05 INDEMNITY OF CERTAIN FIDUCIARIES. The Employersshall
indemnify and hold harmlessthe membersof the Committeeand anv
Employeeswho may bedeemedfrduciariesof the plan within the meaninso{ERISA $ 3(21xA), from andagainstany andall liabirities,craims,demanls.
costsandexpenses,
incrudingattomey'sfees,arisingout ofan alregedbreach
in the performanceof their fiduciary dutiesunderthe pran andundJr ERTSA,
otherthansuchliabilities,craims,demands,
costsandexpenses
usmay re"uli
from the grossnegligence
or willful misconductof suchlersons. The
Employersshalrhavetheright,but not theobligation,toionduct thedefense
ofsuch personsin anyproceeding
to whichthis Sectionapplies.The
Employersmay satisfytheir obligationsunderthis Sectior\in wholeor in part,
throughthepurchase
ofa policy or poriciesof insuranceprovidingequivarent
protection47.
On March24,2005,Bechtelamendedthe plan Documenteffective..asof
January1,2005:"
3.
Paymentof AdministrativeCosts
(a)
To clarifythatthe plan will not payexpenses
incurredin
administeringthe Planthat constitutepa)'rnentsfor ..sittlor" frrnctions,and
thattheAdministratoris chartedwith responsibilityfor determining
whetheror not an expenseis payableby the plan,a newSection6.i7 is
inserted.asfollows:
6.17 ADMINISTRATIVEEXPENSES.Exceptasotherwiseprovided
in the Plan,all expenses
reasonably
andactuallyincurredin the
administrafion
of thePIanby the Company,theCommittee,its delesates
or others,includinglegal,Trusteeandinvestmentmanagement
feesLd
expenses
andcostsofservicesprovidedby Employees
or third parties
("AdministrativeExpenses"),
shallbepayablefrom the TrustFund.exceot
to the extentpaid by the Employersunderparagraph(b) below.
(a)
TheConunittee(in its discretion)shalldeterminewhich
AdministrativeExpenses
arenot payablefor theTrustFundunderthe
foregoingrules.
(b)
The Company(in its discretion)may directtheEmployersto pay
anyor all AdministrativeExoenses.
COMPLAINT/
CLASSACTION
(c)
48.
Notwithstandingthe foregoing, Administrative Expensesshall be
paid from the Trust Fund only to the extent such payments (to the
extent prohibited by section406) are exempt under section 408 of
ERISA.
ERISA ga03(c)(1),29U.S.C.gl l03(c)(1),unambiguouslymandatesthat:
[T]he assetsofa plan shall never inure to the benefit ofany employer and
shall be held for the exclusive purposes of providing benefits to
participantsin the plan and their beneficiariesand defraying reasonable
expensesof administering the plan.
(Emphasisadded).
49.
ERISAgg+0a(a)(l)(e)&(B),2e
u.S.c.gg I l0a(a)(1)(A)
& (B),require
that Plan fiduciaries,including Defendants,"shall discharge[their] duties with respectto
a plan solely in the interestofthe participantsand beneficiaries"and:
A.
[F]or the exclusive purposeofi
i.
providing benefits to participantsand their beneficiaries;
and
ii.
defraying reasonableexpensesof administeringthe plan;
and
B.
[W]ith the care, skill, prudence,and diligence under the
circumstancesthen prevailing that a prudent man acting in a like capacity
and familiar with such matterswould use in the conduct of an entemrise
of a like characterand with like aims.
COMPLAINT/
CLASSACTION
50.
ERISA S 406,29 U.S.C. $ I 106,prohibits certain transactionsbetweenthe
Plan and "parties in interest." Unless subjectto an exemption set forth in ERISA g 40g,
29U.S.C.g I108,a fiduciary
shall not causethe plan to engagein a transaction ...if he knows or should
know that such a transactionconstitutesa direct or indirect - saleor
exchange,or leasing, ofany property between the plan and a party in
interest ...fumishing of goods, servicesor facilities betweenthe plan and a
party in interest ...transfer to, or use by or for the benefit of, a party in
interest,ofany assetsofthe plan.
2eu.S.c.g 1106(a)(1).
51.
For purposesof section406,^"pafty in interest"is any plan fiduciary,
includingtheplanadministrator,
trustee,officer or custodian,any plan servicesprovider,
theemployer,a relativeofany ofthe above,andcertainpersonswith ownershipor
leadership
rolesin any ofthe above.ERISA $ 3(14),29 U.S.C.$ 1002(14).
52.
Similarly,a fiduciary(1) shallnot "dealwith theassetsof theplanin his
own interestor for his own account;"(2) shallnot "act in anytransactioninvolvingthe
planon behalfofa party(or repres€nt
a party)whoseinterestsareadverseto the interests
ofthe plan" or its participantsandbeneficiaries;
and(3) shallnot..receiveany
considerationfor his own personalaccountfrom any party dealingwith suchplan in
connectionwith a transaction
involvingthe assetsof theplan." 29 U.S.C.$ I 106(b).
53.
ERISA9104@Xl),29 U.S.C.$ 1024(bxl),requires
rhattheplan
Adminishatorperiodicallyprovideto Planparticipantsandbeneficiaries
a summaryplan
Description.
54.
ERISA$104(bX3),29 U.S.C.$ 1024(bX3),requiresthattheptan
Administratorat leastannuallyprovideto Planparticipantsandbeneficiaries
copiesof
l8
COMPLAINT/
CLASSACTION
statementsand schedulesfrom the Plan's anmralreport for the previous year, and such
additional information "as is necessaryto fairly summarizethe latestannual report."
55.
The schedulesand statementsthat the Plan Administrator annually must
provide to Plan participantsand beneficiariesspecifically include:
A. [A] statementof the assetsand liabilities of the plan aggregatedby
categories and valued at their current value, and the same data
displayed in comparativeform for the end ofthe previous fiscal year
of the plan; and
B . [A] statementof receiptsand disbursementsduring the preceding
twelve-month period aggregatedby generalsourcesand applications.
ERrsA$103(bX3),
29u.S.c.$1023(bx3).
56.
EzuSA $104(bX4),29 U.S.C. g 1024(bX4),entitles plan parricipantsand
beneficiariesto receivemore detailed information from the Plan Administrator on request:
The administratorshall, upon written requeslof any participant or
beneficiary,fumish a copy of the latest updatedsummary,plan description,
and the latestarurualrepoft. any terminal report, the bargainingagreement,
trust agreement, contract, or other instruments under which the plan is
establishedor operated.
57 .
ERISA g 103(bX2)&(3),29 U.S.C. g 1023(b)(2)&(3)mandatesthat, among
other extensivedisclosures,Plan fiduciariesmust include in the Plan,s .,Annual Report',:
a statement
of [the Plan's]assetsandliabilities,anda statement
of
changesin net assetsavailablefor planbenehtswhich shall includedetails
t9
COMPLAINT/
CLASSACTION
of revenuesand expensesand other changesaggregatedby generalsource
and application.
58.
ERISA $ 404(c),29U.S.C. gll04(c) providesto Plan fiduciariesa..safe
harbor" from liability for lossesthat a participantsuffers in his or her 401(k) accountto
the extent that the participant exercisescontrol over the assetsin his or her 401(K)
accounts. To be eligible for the protectionof this "safe harbor," Plan fiduciariesmust.
among other things, provide:
A.
"an opportunity for a participantor beneficiaryto exercisecontrol
over assetsin his individual account,"and
B.
"a participant or beneficiarywith an opportunity to choose,from a
broad rangeof investmentaltematives,the mannerin which some or all
ofthe assetsin his accountare invested.
29C.F.R.g2ss0.40ac-l(b)(l).
59.
For a participantor beneficiaryto have"an opportunity to exercisecontrol
over assetsin his individual account," Plan fiduciariesmust provide him or her with ..the
opportunity to obtain sufficient information to make informed decisionswith regardto
investmentaltemativesavailableunder the [P]lan." 29 C.F.R. 92550.40ac-\b)(2)(i)(B).
60.
The "sufficient investmentinformation" Plan fiduciariesmust provide
includes:
A.
"A descriptionofany transaction
feesandexpenses
whichaffect
theparticipant's
or beneficiary's
accountbalancein connectionwith
purchases
or salesof interestsin investmentaltematives
(e.g.,
20
COMPLAINT/
CLASSACTION
commrssions,salesload, deferredsalescharges,redemption or exchange
fees)." 29 C.F.R. $2s 50.40ac- 1(b)(Z)(i)(B) ( r) (v) and
B.
At leastupon request,..[a]descriptionofthe arurualoperating
expensesofeach designatedinvestmentaltemative (e.g., investment
managementfees,administrativefees,transactioncosts) which reducethc
rate of return to participants and beneficiaries, and the aggregate amount
ofsuch expensesexpressedas a percentageofaverage net assetsof the
designatedinvestmentaltemative." 29 C.F.R. 92550.404c_
r(b)(2)(i)(B)(2)(r.
61.
ERISA's Safe Harbor Regulationsstatethat the imposition of reasonable
charges for reasonable Plan expensesdoes not interfere with a participant's opportunity
to exercisecontrol over his or her individual accountso long as ptanfiduciaries inform
the participant of such actual expenses:
A plan may chargeparticipants' and beneficiaries'accountsfor the
reasonableexpensesof carrying out investmentinstructions,provided that
procedures are established under the plan to periodically inform such
participants and beneficiaries of actual expensesincurred with respect to
their respective individual accounts.
29 C.F.R. 92ss0.404c-1(b)(2)(ii)(A)(emphasisadded).
62.
Eitherdirectlyor throughtheMasterTrust,Defendants
havecausedthe
Planto purchasetrustee,record-keeping,
administration,
investmentadvisory.investment
2l
COMPLAINT/
CLASSACTION
management,brokerage,insurance,consulting,accounting,legal, printing, mailing, and
other servicesfrom various institutionsand entities.
63.
Either directly or through the Master Trust, Defendantshave causedthe
amountsthat the Plan pays for theseservicesto be assessedagainstparticipants' accounts.
64.
Either directly or through the Master Trust, Defendantshave causedor
allowed theseservicesproviders to receivepayment in at leastone of two ways:
By direct disbursementfrom the P.lanto the entity providing the
service:or
B . By receiving,or having the opportunity to receive,..RevenueSharins',
paymentscomprisedof Plan assetsdistributedbetweenor amons
various service providers.
aHard Dollar" payments to plan Service providers
65.
Paymentsin the form ofdirect disbursementsfrom the plan to participants
or an entity providing a serviceto the Plan are characterizedas "Hard Dollar" payments.
66.
The Plandisclosesto goveffimentregulatorsandplan participants,
in one
form or another,HardDollarpaymentsmadefrom the Planto serviceproviders.For
example,thePlandisclosedin filingswith theDepartment
of Laborthat it paid$33,257
to JP MorganRetjrementPlanServices,
thePlanrecord-keeper,
in2004.
67.
Baseduponthis disclosure,
understanding
the plan'srecord-keeping
expensefor 2004appearsstraightforward:The plan senta checkfor $33,25?to Jp
MorganRetirementPlanServicesand,in exchange,
it maintained
the plans'records.
"Hard Dollar" ExDensesand Master Trusts
22
68.
When a plan, such as Bechtel's, is administeredthrough a mastertrust, the
disclosureof Hard Dollar paymentsfor servicesprovided to the 401(k) plan may become
incomplete,unclear,and inaccurate.
69.
Theseshortcomingsarise when the Hard Dollar paymentsto Plan sewice
providers are madefrom the Master Trus! and.reported to government regulators only in
connection with the Master Trust.
70.
In such circumstances,the P/an's disclosuresto govenunentregulators
and Plan participantsdo not include the Hard Dollar paymentsmade to Plan service
provides from the Master lrzsl. Those payments to Plan service providers - because
they are disbursedfrom the Master Trust - arereportedin the mastertrust's disclosures
to governmentregulators. Details of such paymentsfrom the Master Trust are not
routinely disclosedto Plan participants.
71.
As a result, it may appearto Plan participantsand govemmentregulators
that Hard Dollar paymentsmadeby the Plan to serviceprovidersin a given year were
very small - or that the Plan did not incur such expensesat all.
72.
But, in actuality,millions of dollars in P/az Hard Dollar paymentsto plan
service providers may have been disbursedy'on the Mdster Trust.
73.
Even though such Hard Dollar palrmentsare disbursedfrom tie Master
Trust, the plan and its participantsstill pay them: The MasterTrust assesses
the amount
ofthese Hard Dollar payrnentsagainstthe Plan's assetsheld in the Master Trust.
74.
The Defendants'Plan financial statementsfiled with sovemment
regulatorsmake this clear:
23
COMPLAINT/
CLASSACTION
At December31, 2004 and 2003, the Plan's interestin the net assetsof the Master
Trust was approximately99.97 percent. Net investment income and
administrative expensesrelating to the Master Trust are allocated to the
individual plans based upon individual plan participant account balances.
(EmphasisAdded).
75.
For example,in 2004, Bechtel or the Committeereported to Plan
participantsin the Plan's 2004 SummaryAnnual Report, and to govemment regulators
that the Plan incurredonly $33,257in record keeping expensesand no other
administrativeexpenses.
76.
Thereafter,DefendantKnox extolled the great savings-$5.9 million - that
changesin the Plan and Plan serviceproviders had achievedfor Plan participants.
77 .
However, in actuality, Bechtel and the Committee had changedthe
accountingof the Plan's administrativeand investmentmanagementexpensesfrom the
Plan level to the Master Trust level. The result was that Plan expenses had increasedby
more than $2 million and were not disclosed to participants and govemment regulators
specifically in connectionwith the Plan, even though the Plan still had to pay them.
78.
Thus, Defendants'claim of savingsto Plan participantswas affirmatively
misleadingand deceptive.
79.
The Defendants' conduct in disbursing Hard Dollar payments for Plan
services from the Master Trust in this or a similar manner, makes it difficult, and
sometimesimpossible,for Plan participantsto discernthe amount of Hard Dollar
payments the Plan is making to Plan service providers; to whom those payments are
made; and the servicesprovided in exchangefor thosepayments.
COMPLAINT/
CLASSACTION
Further, as Defendants'conduct demonstrates,manipulatingthe reporting
80.
of Plan expensesbetweenthe Plan and Master Trust level hasenabledthe Defendantsto
both:
concealthe fact that Plan fees and expensesubstantiallyincreasedfor no
apparent reason and with no cornmensuratebenefit to participants; and
b.
falsely suggestthat Plan fees and expenseshad decreasedby millions of
dollars as a result ofthe Defendants'efforts.
81.
RevenueSharingis a common practice in the hnancial, securities,and
investrnentindustry that providesservicesto 401(k) plans.
82.
Industry commentatorsand analystsconsiderRevenueSharingas the..big
secret of the retirement industry."
83.
Industry cornmentators and analysts generally define Revenue Sharing as
the transfer of asset-basedcompensation from brokers or investrnent management
providers(suchasmutualfunds,commoncollectivetrusts,insurance
companies
offering
generalinsurance
contracts,andsimilarpooledinvestmentvehicles)to administrative
serviceproviders(record-keepers,
administrators,
trustees,
consultants)
in connection
with 401(k)andothertypesof definedcontributionplans. Suchtransfersmayconsistof
monetarypaymentsand./ornon-monetarybenefitssuchasa credit for services,equipment,
educational
materials,conferences
andseminarsat resortsandhotels,or the like.
84.
Forexample,a planor its agent(a third-partyadministrator,
consultant,
or
similarfiduciary)seekingto investplanassetsin an investrnent
vehicle(a mutualfiurd,
commonandcollectivetrust,guaranteed
investmentcontract,etc.(collectivelya .,Fund',))
25
will negotiatean agreementthat setsthe coststo be assessedagainsteachdollar invested
by specifying the Fund's expenseratio and revenuesharingthat the Fund will make
available.
85.
In RevenueSharinganangements,the Plan and the Fund agreeupon an
asset-basedfee that is nol the true price for which the Fund will provide its service.
86.
Instead, in Revenue Sharing arrangements the Fund's agreed asset-based
fee includes6atft the actual price for which the Fund will provide its serviceazd
additional amounts that the Fund does not need to cover the cost of its services and to
make a profit.
87.
The additional portion of the agreed-uponasset-based
chargeis ..shared"
with Plan serviceproviders or others who do businesswith the plan or the Fund.
88.
As a result ofRevenue Sharingarrangements,plan serviceprovidersor
others who do bnsiness with the Plan or the Fund may receive both aHard Dollar
payment from the Plan and additional revenue that the Fund ..shares" with them.
89.
The total feesa Fund chargesto a PIan can vary widely basedupon a
number of factors,including without limitation: the amount that the plan investsin the
Fund; the level of sophisticationofthe Plan fiduciary negotiatingthe fee agreement;the
Plan fiduciary's awarenessof Revenue Sharing and inclination to expend effort
monitoring revenue sharing transfers; the diligence with which the plan fiduciary
conductssuch negotiations;and the separatefinancial interestsor agendasofthe plan
fiduciary and the Fund as they negotiate.
90.
Revenuesharingis not confined to mutual finds. Common collective
trusts, providers of guaranteed insurance contracts, and private investment pools may
26
enter into RevenueSharingarrangementsin cormectionwith the servicesthey provide to
401(k)plans.
91.
RevenueSharingalso occurs betweenand among brokeragefirms,
investmentmanagers,fund families, and other serviceproviders.
92.
When Plan serviceproviders receivecompensationin the form of both
Hard Dollar fees and Revenue Sharing payments, determining the total amount offees
and expensesthat the Plan incurs for any category of services (i. e. recordkeeping and
administration,investmentmanagement,trustee,auditing, and accounting,etc.) requires
that both the Hard Dollar fees and Revenue Sharing payments be taken into account.
93.
Ascertainingwhether the Plan Administrator has fulfilled its hduciary
obligation to ensurethat the fees and expensesassessed
againstthe plan are reasonable
and incurred solely in the interest of Plan participants requires consideration of the totql
of both the Hard,Dollar and Revenue Sharing payments paid (or available) for any
categoryof services.
94.
Although RevenueSharingmoniesariseonly as a result of, and in
connectionwith, transactionsinvolving the Plan, Plan assets,and Plan serviceproviders,
Revenue Sharing is not always captured and used for the benefit ofthe plan and its
participants.
95.
When RevenueSharing is foregone,the Plan will be forced not only to
pay additional Hard Dollar fees to the Plan service providers (since no Revenue Sharing
paynents are used to offset those Hard Dollar costs), but the Plan will also pay additional
money to the Fund, beyondwhat the Fund would normally keep (becausethe Fund,s
21
COMPLAINTI
CLASS ACTION
expenseratio includesboth the actual price ofthe Fund's servicesazd RevenueSharing
amounts).
96.
Consequently,in determiningwhetherthe Plan Administrator or other
fiduciary has fulfilled its obligation to ensurethat the fees and expensesassessedagainst
the Plan ate reasonableand incurred solely in the interestof Plan participants,foregone
RevenueSharingmust also be taken into account.
97 .
Such is the casein the BechtelThrift and Trust Plan. The Plan's
investmentoptions, including mutual fi.rndsand certainof the collective trusts,charged
fees to the Plan (as part of the investmentoptions' expenseratios) that included amounts
with which to make Revenue Sharing payments. However, the available revenue sharing
was not captured and used solely in the interest of the Plan and its participants and
beneficiaries.
As a result,whensuchforegoneRevenueSharing- consistingofmillions
98.
ofdollars - is takeninto account,theparticipants
andbeneficiaries
of the planpaid
unreasonablyhigh feesfor the administrativeservicesand/orinvestmentmanagement
they received.
99.
In additionto obscuringthereportingof, andmakingaffirmatively
misleadingstatements
ignoring,the morethen$2.5million increasein theadministrative
feesbomeby Planparticipantsin 2004,theDeGndants
failedto discloseandexplainto
Planparticipants
why theyassessed
morethan$1.3million in legalandconsultingfees
againstPlanparticipants'retirementsavingsin 2003and2004.
100. In the sametime framethat Defendantsincurredtheseseven-figure
professional
fees,Defendants
weremakingsubstantial
alterations
to thederrgnofthe
28
against
of expenses
plan- a settlorfunctionfor whichERISAprohibitsthe assessment
the Plan.
l0l.AftercompletingthesePlandesignalterationsandpayingoutthis$1.3
the Plan Documentto
million in Planassets,onMarch 24' 2005' Defendantsamended
the Planthat
..clarify',thatthePlanshould"not pay expenses
incunedin administering
constitutepaymentsfor'settlor functions'"' Saef147,above'
|02.Basedonthefcregoing,Plaintiffsareinformedandttelievethatthe
against
to be assessed
causedthe morethan$1 million in settlorexpenses
Defendants
participants'retirementsavingsin violationof ERISA'
103. RevenueSharingis not disclosed1oPlanparticipantsandgovernment
of
eventhoughit may accountlbr a greaterportionofcertaincategories
regulators,
to thosesameproviders.
serviceproviderpaymentsthando HardDollar disbursements
lO4.
Accordingly, industrycommentatorsandexpertshavedubbedRevenue
against401(k) plans andthus
Sharingpaymentsto be "hidden fees" that areassessed
reduceplanparticipants'retirementsavings'
105. By enteringinto, allowing,and/orfailingto monitor,discover,andprevent
or recovertheseundisclosedRevenuesharing anangements,Defendantshaveand
continueto deprivePlanparticipantsof true and accurateinformation regarding:
for thePlan;
A. How muchtheyarepayingin feesandexpenses
B- Who is receivingPlanassetstfirough RevenueSharing;
C. How muchserviceprovidelsarepaidin additionto their disclosed,
HardDollar fees;and
29
COMPLAINT/
CLASSACTION
D. Whetherthe total amount paid to servicesproviders (i-e. disclosed,
Hard Dollar fees combinedwith RevenueSharins) is reasonableand
incuned solely for participants' benefit.
Defendants' Non-Compliance with I 404(c)'s Safe Harbor Resuirements
and Concealment of Fiduciary Breaches
106.
As set forth above,the Defendantsdid not disclose,and to this day have
not disclosed,the fact that Plan serviceproviders were engagingin RevenueSharing,or
that RevenueSharing was available for the benefit ofthe Plan and its participants,or the
amount of RevenueSharingpaymentsmadeby or to Plan serviceproviders.
107.
Plan participants did not have, and do not have, complete and actual
knowledge ofthe fees and expensesbeing charged to the Plan that reduce their account
balances.
108.
Plan fiduciaries,including the Defendants,have not told Plan participants,
and Plan participants do not know:
a.
the "arurualoperatingexp€nses"ofthe investmentoptions in the Plan, as
required by 29 C. F.R. 92550.404c-I (b)(2)(l)(B) (2) (i) ; and
b.
the actual expensesincurred with respect to their respective individual
accounts,as required by 29 C.F.R. 92550.404c-l(bX2XiiXA).
109.
As a result ofthe Defendants'failure and refusal to provide such
information - and the general failure on the part of the Plan fiduciaries to disclose the
actualPlan expenses,including availablerevenuesharing-- Plan participantshave not
beenprovided with "the opportunity to obtain sufficient information to make informed
decisionswith regardto investmentaltemativesavailable underthe plan." 29 C.F.R.
I (b)(2)(B).
$2ss0.a0ac30
COMPLAINT/
CLASSACTION
110.
Becausethe Defendantsfailed and refusedto provide them with this
information, and concealedthis information from them, the participantshave lacked the
information necessaryto understandand protect their interestsin the plan or to have
knowledge of the Defendants'breachesoffiduciary duty.
1 11.
In fact, in their fiduciary roles, Defendantsare the partieswith the
information necessaryto know and understand whether the participants' rights and
protectionsunder ERISA are being, or have been,violated.
ll2.
Defendantshave an afllrmative obligation to provide full and accurate
information to the Plan participantsregardingthe administrationofthe plan.
113.
Defendants'silenceand/or non-disclosurein the face ofsuch a dutv to
discloseis equivalentto an affrrmative misrepresentation.
. ll4.
Here, despitethe Defendants'duty to disclosefull and accurate
information regardingthe feesand expensesassessedagainstparticipants' accounts,on
an ongoing basis Defendants failed and refused to disclose to, and inform the parlicipants
of:
a.
the amount of fees and expensesreasonableand necessaryto operate
the Plan;
b.
the total amount of amount offees and expensesthe Plan actually paid
to service providers in the form of Hard Dollar payments and Revenue
Sharing;
c.
the availability ofRevenue Sharing;
d.
the true and accuratedetails regardingthe feesand expensesofthe
Plan:
lt
COMPLAINT/
CLASSACTION
the true and accurateoperatingexpensesthat reduceparticipants'
retums, including both Hard Dollar paymentsand RevenueSharing,for
eachofthe Plan's investmentaltematives;
the true and accurate transaction fees and expensesthat affect the
participants' account in connectionwith the purchaseor sale of
investmentaltematives;
g.
the amount, when both Hard Dollar Paymentsand RevenueSharing
are considered,by which the Plan's expensesexceededthosewhich
were reasonableand incurred solely in pa(icipants' interests;and
h.
other revenueand expenseinformation necessaryfor the participants
to turderstand and protect their interests in the Plan.
115.
Basedupon the foregoing, Defendantsare not entitled to the safeharbor
protectionsofERISA g aOa(c).
116.
Basedupon the foregoing, the statueof limitations was tolled on the
breachesset forth in this complaint and did not begin to run until such time as plaintiffs
actually discovered them.
COUNT I:
[Breachof Fiduciary Duty - ERISA 9502(aX2)l
tt7.
Plaintiffsrestateandincorporatetheallegationscontainedin ,!f$I
through116asthoughfully setforth here.
118.
As setforth in detailabove,Bechtelowesto the Plan,its participants
andbeneficiaries,
andtheclass extensivefiduciarydutiesincluding,withoutlimitation:
A. To conduct itself as Plan Sponsorand Administrator with the care,
skill, prudence,and diligence underthe circumstancesthen prevailing
COMPLAINT/
CLASSACTION
that a prudentERISA professionalfiduciary would in operatingand
administeringa 401(k) plan the size and characterofthe Plan;
R
To perform its duties as Plan Sponsorand Administrator with the
utmost loyalty and,fidelity to the Plan and its participants and
beneficiaries,avoiding at all times conflicts of interest,self-interest,
and duplicity;
(
To ensure, at all times, that Plan assets"shall never inure to the benefit
ofany employer and shall be held for the exclusive purposesof
providing benefits to participants in the Plan and their beneficiaries
and defraying reasonableexpensesof administeringthe Plan;"
D. To track and accountfor all transactionsinvolving the Plan and Plan
assetsso as to ensure that Plan assetsare retained, managed, and
disbursedin compliancewith the Plan Documentand ERISA;
E. To track and account for all transactions involving the Plan and Plan
assetsso as to ensurethat Plan assets"never inure to the benefit ofany
employer and shall be held for the exclusivepurposesof providing
benehts to participants in the Plan and their beneficiaries and
defraying reasonableexpensesofadministering the PIan;"
F. To ensure that the fees and exp€ns€sincurred by the Plan are
reasonableaad incurred for the sole and exclusivebenefit of Plan
participantsand beneficiaries;
ll
G. In entering into agreementswith serviceproviders to the Plan, to
ensure that the payments from the Plan, whether they are direct or
indirect, are reasonablefor the servicesprovided and made for the sole
and exclusive benefit of Plan participantsand beneficiaries;
H. In operatingand administeringthe Plan, to establish,implement,and
follow proceduresto properly and prudently determinewhetherthe
feesand expensespaid by the Plan were reasonableand incurred
solely for the benefit of Plan participants;
I.
In operatingand administeringthe Plan, on an ongoing basisto
monitor the paymentsmade by the Plan to serviceproviders,whether
they are direct or indirect, are and remain reasonable for the services
provided and made for the sole and exclusive benefit ofPlan
participantsand beneficiaries:
J.
To inform itselfof, and understand,the various methodsby which
vendorsin the 401(k) industry collect paymentsand other revenues
from 401(k) plans;
K. To inform itselfoftrends, developments,practices,and policies in the
retiremen! financial investment, and securities industry that affect the
Plan and to remain awareand knowledgeableofsuch trends,practices,
and policies on an ongoing basis;
L. To communicate with Plan participants and beneficiaries regarding the
Plan honestly,clearly, and accurately;
34
COMPLAINT/
CLASSACTION
M. To affirmatively and without requestprovide Plan participantsand
beneficiarieswith honest,accurat€,and complete information they
needto understandtheir investmentsin the Plan; the management,risk,
potential returns of such investments; and the fees and expenses
incuned in connectionwith thoseinvestments;
N. Upon reques! to provide further information to Plan participants and
beneficiariesregardingthe operationand administrationofthe Plan
and the expensesincurred in doing so; and
O. To provide honest,accurate,and complete information to Plan
participantsand beneficiariesregardingthe costsassociatedwith their
various investmentchoicesand directions.
119.
As set forth in detail above,Bechtel breachedis fiduciary obligations
to the Plan, Plan participantsand beneficiaries,and the Classby, among other conduct to
be proven at trial:
Causingthe Plan to enter into agreementswith serviceproviders under
which the Plan pays,directly or indirectly, feesand expensesthat are
unreasonableor not incurredsolely for the benefit of Plan participants
and beneficiaries;
B. Allowing the Plan to pay, directly on indirectly, feesand expensesare
umeasonableor not incurred solely for the benefit of Plan participants
and treneficiaries;
U.
Failing to monitor the fees and expensespaid by the Plan and, by such
failure, causingor allowing the Plan to pay feesand expensesthat are
35
COMPLAINT/
CLASSACTION
unreasonableor not incurred solely for the benefit of Plan participants
and beneficiaries;
D. Failing to inform itself of trends,developments,practices,and policies
in the retirement, financial investment, and securities industry that
affect the Plan; and failing to remain awareand knowledgeableofsuch
trends,practices,and policies on an ongoing basis;
E. Failing to inform itself of, and understand,the various methodsby
which vendorsin the 401(k) industry collect paymentsand other
revenuesfrom 401(k) plans;
F. Failing to establish,implement,and follow proceduresto properly and
prudently determine whether the fees and expensespaid by the Plan
were reasonableand incurred solely for the benefit of Plan participants;
G. Failing to communicate with Plan participants and beneficiaries
regardingthe Plan honestly,clearly, and accurately;
H. Failing properly to inform or discloseto Plan participantsthe feesand
expensesthat are, or have been, paid by the Plan;
Failing to inform or discloseto Plan participantsin properdetail and
clarity the transactions, fees, and expensesthat affect participants'
accountsbalancesin connectionwith the purchaseor saleof interests
in investmentaltematives;
J. Failing to discover,disclose,and stop the chargingof hidden and
excessivefeesto the Plan:
JO
COMPLAINT/
CLASSACTION
K. By the foregoing conduct,failing to exercisethe care, skill, prudence,
and diligence that a prudent personwould when acting in like capacity
and familiar with such matters.
120.
As set forth in detail above,as a result ofthese breaches,Ptaintiffs, the
Class,the Plan, and the Plan's participantsand beneficiarieshave suffered financial
lossesand damases.
lzt.
Further,as set forth in detail above,Bechtel failed to provide
participantsand beneficiarieswith suffrcientinvestmentinformation to qualify for the
SafeHarborimmunityof ERISAg a0a(c),29U.S.C.1104(c).Accordingty,Bechtelis
liablefor participants
andbeneficiaries'investmentlossesin thePlan.
t22.
Pursuantto ERISA S 409,29U.S.C.$ I 109,andERISA $ 502(a),29
U.S.C. $ 1132(a),Bechtel is liable to restoreto the Plan the lossesit experiencedas a
direct result of Bechtel's breachesof fiduciary duty and is liable for any other available
and appropriateequitablerelief, including prospectiveinjunctive reliefand declaratory
relief. and attornev'sfees.
ro. u."u"offi*out*
[otherRemedies
123.
Duty- ERISAg502(a)(3)]
Plaintiffs restateand incorporatethe allegationscontainedin t[t[ I
through122asthoughfully setforthhere.
124.
In addition to, and as an altemativeto, the causesofaction statedin
CountI, Plaintiffsseekfurtherrelief pursuantto ERISA g 502(a)(3),29 U.S.C.,$
I132(a(3).
37
COMPLAINT/
CLASSACTION
12s.
UnderERISA $502(a)(3),a participantmay enjoinany actthat
violatesERISAor may obtainotherappropriateequitablereliefto redresssuchviolations
or enforcethetermsof ERISA.
126.
Defendants
aretheprimaryfiduciariesof the Planandoccupya
position of trust and confidencein connectionwith the plan, the plan's assets,and the
Plan'sparlicipantsand beneficiaries.
127.
Defendantshave exclusive discretionand control over the plan's
assetsand are strictly obligatedto exercisethat control "for the exclusive purposesof
providing benefits to participants in the Plan and their beneficiaries and defraying
reasonableexpensesof administeringthe Plan."
128.
Although ozly Plan participants and beneficiaries are entitled to plan
assetsand to the benefit of Plan assets,in the absenceof full and candid disclosure from
Defendants, Plan participants and beneficiaries do not know, and have no means of
knowing, how their assetshave been managed and disbursed.
129.
Accordingly, Defendantsoccupy the position of a common law trustee
in corurection with the Pla& its assets,and its participants and beneficiaries.
130.
As set forth in detail above, Defendants have caused and/or allowed
the Planto pay, directly or indirectly, excessfeesandexpensesto plan serviceproviders.
l3l.
Defendants,and not the Plaintiffs, arethe entitiesthat have.or should
have, specific and detailed information regarding how plan assetshave been treated and
disbursedin this regard.
38
COMPLAINT/
CLASSACTION
render an
Accotdingly, the Court should order that Defendants
l??
occurringin' in connection
accountingofall kansactions,disbursements'anddispositions
wittu or in respectof, the Planand its assets'
t33.
Plaintiffs respectfullyrequestthat the Court order that suchan
information
accountinginclude,without limitation, detailedandspecific
regardingall
feesandexpensesincunedbythePlanorpaidtothirdparties,whetherpaiddirectlyby
providersor
the Planor the MasterTrust or indirectly transfenedamongPlansewice
other third parties.
134.
Plaintiffs respectfullyrequestthat the Court surchargeagainstthe
DefendantsandinfavorofthePlanallamountsinvolvedintransactionsthatsuch
acoountingrevealswereorareimproper,excessiveorinviolationofERlSA'
135.
Plaintiffs further seekinjunctive andother appropriateequitablerelief
order for the Plan's
to redress the wrongs described above and to causethem to ceasein
participantsandtreneficiariestoreceivethefullbenefitoftheirfotirem€ntsavingsinthe
future.
WHEREF0REPlaintiffs,onbehalfofthePlanandallsimilarlysituatedPlan
respectfullyrequestthattheCourt:
andbeneficiaries'
participants
o find and declarethat the Defendantshavebreachedtheir frduciary
dutiesasdescribedabove;
o order the Defendantsto makegoodto the Planall lossesthat the Plan
incurredas a resultof the conductdescribedaboveand to restorethe
of
Planto thepositionit wouldhavebeenin but for thebreaches
fiduciary dutY;
39
COMPLAINT/
CLASS ACTION
.
imposea constructive
truston anymoniesby which the Defendants
wereunjustlyenrichedasa resultof theirbreachesof fiduciaryduty or
causethe Defendantsto disgorgesuchmoniesand retum them to the
Plan;
removethe fiduciarieswho havebreachedtheir fiduciary dutiesor
enjointhemfrom futurebreaches
of ERISA;
awardactualdamagesto the Planin the amountof its monetarylosses;
requireDefendantsto rendetan accountingas set forth above;
surcharge
againstDefendants,
andin favorofthe Plan,all amounts
involved in transactionthat suchaccountingrevealsareimproper,
excessiveor in violationof ERISA:
permanentlyenjoin Defendantsfrom breachingtheir fiduciary dutiesin
eachrespectset forth in the Complaint;
awardto the Plaintiffs andthe Classtheir attorneysfeesand costs
pursuantto ERISA $ 502(9);
order costsand attomeysfeespursuantto ERISA $ 502(9)and the
commonfund doctrine;
order equitablerestitutionor otheravailableequitablerelief againstthe
Defendants:
order the paymentof interestto the extentit is allowedby law; and
$ant any other and further relief the Court deemsappropriate.
40
COMPLAINT/
CLASS ACTION
PLAINTIFFS DEMAND A TRIAL BY JURY OF ALL COUNTS SO TRJABLE.
Dated: September
I l, 2006
Respectfu
lly submitted,
Schlichter, Bogard & Denton
Mhry L. Wrry - #l7fi9ll
JeromeJ. Schlichter- #0545143
DanielV. Conlisk
HeatherLea
100SouthFourthStreet
Suite900
St.Louis,MO 63102
Tel: 314-621-6115
Fax: 314-621-7151
ATTORNEYSFOR PLAINTIFFSBeverly
Kanawi;ZoltanInczeand SalvadorAquino
asrepresentatives
ofa classof similarly
situatedpersons,and on behalfof the Plan
4l
COMPLATNT/
CLASSACTION