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A U.S. District Court judge in Bridgeport dismissed a $230 million lawsuit by former employees of United Technologies Corp., who claimed the company hoarded cash in its pension plan at inopportune moments and paid excessive fees to its pension-plan administrators ”“ allegedly denying beneficiaries additional gains in the stock market.
Hartford-based UTC is the largest employer in both Connecticut and Fairfield County, in the latter case via its Sikorsky Aircraft Corp. subsidiary in Stratford.
Illinois residents Jim Conlin, David Taylor and Karl Todd sued UTC in 2006 under the federal Employment Retirement Income Security Act (ERISA), which holds companies accountable for protecting beneficiary assets. The three men had sought class-action status for the lawsuit on grounds that more than 50,000 people hold assets in UTC”™s retirement plans.
Representing the plaintiffs was Bridgeport-based Cohen & Wolf P.C. and the St. Louis law firm of Schlichter, Bogard & Denton, the latter firm filing at the time of the UTC lawsuit a half-dozen more cases alleging similar ERISA violations at various Fortune 500 companies.
Taylor worked for Carrier Corp., while Todd retired in 2000 from Otis Elevator Co. Both UTC subsidiaries are based in Farmington.
Under UTC”™s Employee Stock Ownership Plan, the company matches 60 percent of employee contributions with shares of UTC stock.
The 401(k) plan, valued at $13.7 billion in 2006 at the time of the lawsuit, is held in a master trust by Boston-based State Street Bank & Trust Co., and is administered by an affiliate of Fidelity Investments.
Conlin, Taylor and Todd claimed that after UTC informed plan participants it would pay Fidelity a per-participant fee of $10 quarterly, UTC quietly tossed in performance-based kickbacks that doubled the fees paid to the Boston-based company ”“ without alerting plan participants of the arrangement.
The trio alleged that UTC also cost plan participants as much as $69 million by hoarding cash at inopportune moments ”“ such as in the anxious run-up to the Year 2000 computer bug and the period following the 2001 terrorist attacks, when the pension plan banked cash as a hedge against jittery markets.
The plaintiffs also claimed that UTC”™s plan failed to record monetary interest on their behalf in the “float” period when a beneficiary made an order to cash out shares, and when those benefits were actually delivered.
According to Washington, D.C.-based Covington & Burling, which represented UTC along with Day Pitney LLP, the decision was the first to reject a challenge to such a “cash drag” in company stock funds.