American bank First Union has settled its pensions dispute with its employees for $26m (£18m), according to the bank and lawyers for plaintiffs.
Judge Richard Williams of the East Virginia US District Court, has given preliminarily approval for the settlement of the two class action lawsuits. Additionally, Judge Williams has scheduled a final hearing concerning the fairness of the settlement for June 13 2001, at 10 am.
The lawsuits were filed against First Union in September 1999, on behalf of more than 100000 former and current employees of the bank. First Union bought Signet Bank in 1997, and the lawsuits accused First Union of using the 401(k) plan’s of Signet and First Union to boost company profits at the expense of employees.
The suit claimed that First Union treated employees as a “captive audience,” and invested their retirement funds in what they called First Union’s “mediocre” mutual and bank funds. By doing this, the suits contended that First Union deliberately used employee’s cash to increase the size of its funds to make them look more attractive to outside investors.
Originally, First Union employees sought $300m (£210m) in damages, while Signet employees were after $150m (£105m). Of the $26 million settlement, $10 million is designated for the Signet case and $16 million will go to the First Union suit. The settlement also calls for First Union to appoint an independent advisor to the fiduciary committee of First Union’s 401(k) plan.
According to a spokeswoman for First Union, the settlement is in no way an admission of guilt. The spokeswoman added: “We believe that we would have won in court. We had already won on several preliminary issues and we settled now to end the litigation, while it would still be covered by insurance.”
The employees and their lawyers, the Washington DC based Sprenger & Lang and Hirschler, Fleischer, Weinberg, Cox & Allen of Richmond, Virginia, believe that the settlement agreement is in the best interests of the employees.
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