US - A class action suit seeking to hold the Detroit General Retirement pension fund (DGR) trustees accountable for their investment decisions has been approved in what is said to be a precedent setting case.
Wayne County Circuit Court judge Amy Hathaway has certified a class action filed on behalf of over 9,000 pension plan participants and beneficiaries alleging the responsibility of several present and former DGR trustees' for losses of over US$100m.
Mantese and Rossman attorney and counsel for the pensioners Gerard Mantese told Global Pensions this was the first case in which a US class action alleging the accountability of the trustees of a public pension fund was approved.
He said: "In this case the trustees attempted to argue they were completely immune from liability because they were governmental actors, but an exception to governmental immunity can apply in the cases of gross negligence."
In contrast, Mantese said class actions alleging private pension plans trustees' breach of fiduciary duty were approved in the past.
The court also held that the loss of plan money constituted a concrete risk of harm to the pensioners who participate in the $3.97bn scheme.
The suit alleged numerous investments which led to such losses were "indefensible" and that "based on even a cursory inspection of the proposed investments, a rational, prudent person would not have invested in the proposals, let alone with entrusted pension funds."
It also challenged the trustees' alleged expenditure of hundreds of thousands of dollars on travel, as well as their alleged destruction of plan documents.
Co-counsel John Conway added: "The fact that $100m was squandered creates an imminent risk of harm to individual pensioners."
The motion arises out of a complaint originally filed on May 1, 2009, in which pensioners alleged gross negligence against the trustees.
A spokesperson for the DGR did not immediately return calls seeking comment.
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