Too much bank stock, suit claims
A former Sterling Financial Corp. employee has sued the Spokane financial institution alleging administrators of its 401(k) plan imprudently invested as much as 20 percent of plan assets in company stock that has plunged in value.
The lawsuit filed by Cory Deter says Sterling officers, starting with the release of second-quarter 2008 earnings, misrepresented the losses and potential losses the company faced as its substantial portfolio of construction and real estate loans soured.
Stock that peaked in October 2008 at $14.72 per share was worth 70 cents Monday, when the suit was filed in U.S. District Court in Spokane.
The 401(k) plan was administered by a committee appointed by Sterling directors. Several committee members were bank executives or directors.
The new suit repeats many claims made in a separate shareholder suit alleging earnings reports were misleading, but adds that as fiduciaries for plan members, the administrators had a higher responsibility to assure the plan’s investments were prudent.
Sterling matched up to 35 percent of employee contributions to the 401(k) plan. The match was Sterling stock.
Administrators should have known those shares represented too large a portion of plan assets, the suit says. As Sterling executives, some administrators receiving stock as part of their compensation also had conflicts of interest regarding financial disclosures, and the damage their holdings might sustain if the plan divested its shares.
The 401(k) had 2,500 members, and Deter is asking the court to treat his claim as a class action.
Sterling spokeswoman Cara Coon said the company believes the suit has no merit, and will defend itself vigorously.