A class-action lawsuit that alleged that tens of thousands of participants in two General Dynamics 401K plans were charged excessive fees has been tentatively settled for $15.15 million, the parties announced late Wednesday.
The lawsuit, representing current and retired employees in the plans, was originally filed in federal court 2006 against General Dynamics Corp. and Fiduciary Asset Management LLC of Clayton, as well as executives of both companies.
The suit alleges, among other things, that billions of dollars worth of 401K business was handed to FAMCO without a competitive bidding process and that costs and fees for plan participants were inflated.
"In addition to the money, the settlement documents describe significant benefits and disclosure participants will have in their 401k plan going forward," said Jerome J. Schlichter, a lawyer representing the plan participants, on Thursday.
Representatives of General Dynamics and FAMCO could not be reached for comment Thursday afternoon.
General Dynamics and FAMCO said in a joint statement with Schlicter that they have complied with all requirements of the federal law governing the plan, the Employee Retirement Income Security Act of 1974, but said settlement was in the best interests of all parties.
The payout will come from insurance, and will be deposited into the 401k accounts after costs and attorney's fees and subtracted, the statement says.
As part of the settlement, General Dynamics agreed to use an outside consultant to review parts of the 401k plans and "enhanced disclosure" of fees and expenses for the accounts, among other agreements.
The settlement bars FAMCO from recommending itself as investment manager for the accounts or recommending investment into accounts it manages.
The settlement still requires approval of a number of parties, including a federal judge and a representative of the account holders. A hearing is scheduled for Monday in federal court in East St. Louis to begin that process.
FAMCO was founded in 1994 by pension fund managers at General Dynamics.
In 2007, the company was purchased by a Minneapolis investment banking firm, Piper Jaffray Cos.
General Dynamics moved from Clayton to Falls Church, Va. in late 1991.
BY ROBERT PATRICK