US - Michigan-based Sterling Heights Police & Fire Retirement System has brought a class action lawsuit against Mattel, following mass recalls of the company's toys.
The suit has been brought against Mattel over alleged lapses in reporting problems with defective and hazardous toys. It also accuses Mattel insiders of allegedly profiting from stock sales ahead of announced recalls.
Law firm Grant & Eisenhofer explained this was the first case stemming from Mattel’s toy recall brought in Delaware, where the company was incorporated, and whose laws will govern the lawsuit.
The fund, which continues to be an investor in Mattel, brought the action on behalf of Mattel shareholders.
Grant & Eisenhofer said Mattel's lapsed reporting, which shareholders allege was standard policy at the toy maker for years, led to repeated false and misleading financial reporting to investors, who saw Mattel’s share price fall more than 20% in the wake of the recalls.
Shareholders have also alleged that Mattel has continued to hold back reporting of product problems even after being called to task on its lapses by the Consumer Product Safety Commission (CPSC).
“Since 2001, the CSPC has fined Mattel twice for 'knowingly’ withholding information regarding problems that created an unreasonable risk of injury or death,” the complaint stated.
Jay Eisenhofer Grant & Eisenhofer partner, who represents the Sterling Heights pension fund said: “By consistently refusing to abide by federally mandated rules governing disclosure of product safety issues, Mattel has failed its stakeholders and regrettably used its illegal, drawn-out reporting to mislead investors as well as to cover up profit-taking by company insider.
"Those actions add up to a breach of trust in the extreme, especially since Mattel’s disclosure violations placed millions of children at risk of serious injury. This is a most unfortunate ‘Toy Story.' ''
Global Pensions contacted Mattel and was awaiting a response at the time of going to press.
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