It has been suggested that Comcast may have dropped the ball in its fiduciary duties as managers of 401(k) plans under the Employee Retirement Income Security Act (ERISA) of 1974. Under the legislation, minimum standards are established for pension and health plans enacted by private businesses and corporations, and offers protection for investors and plan participants who may be hurt by the performance of the company as it relates to retirement, and investment plans.
In sum, a company has a certain responsibility to its investors, and if it is determined that the company has put its own interests ahead of its investors, then it could be seen as having broken its fiduciary duties.
At the beginning of 2007, it appeared as if Comcast was in for a banner year. First-quarter profits tripled, and the company's stock was up 70 per cent from the start of 2006.It was also coming off of a banner fourth quarter closing out of 2006, when the company inked 110,000 new basic video scribers, its strongest growth in that sector, in ten years.
Also in the fourth quarter, Comcast said it signed up 613,000 digital video subscribers, added a net 508,000 digital phone customers, and 488,000 high-speed Internet subscribers.
And yet, there were signs of concern even then. In spite of the heady performance, aggressive capital spending plans for 2007 was the cause for caution on Wall Street. While revenue growth forecasts of 11 per cent were in line with market expectations, projected capital spending of $5.7 billion was above what analysts had expected.
Comcast expected free cash flow to be flat in 2007, as compared with a 30 per cent increase the year before.
Thus, there appeared to be some warning signs.
Cut to October 25th 2007, when the company announced its third-quarter performance ending September 30th. Net income had fallen 54 per cent from a year earlier, and subscriber growth was slowing.
Not long after, on December 4th the company issued a communiqué announcing a cut in its user growth forecast for 2007 of 6.5 million revenue-generating units (RGU), correcting it to 6 million RGU. Revenue and cash flow projections would fall short of expectations.
Comcast has scheduled a conference call with the financial community on February 14th, in order to discuss fourth quarter performance, as well as that of the entire year, and to announce the company's forecasts for 2008. Fourth-quarter, and 2007 summaries will be issued just prior to the implementation of the conference call on the morning of the 14th—Valentines Day.
The less-than-stellar performance in 2007 has allegedly had a dramatic, negative impact on the value of stock held by investors, and the Comcast employee holding a Comcast 401(k) plan. Such losses could very well be in violation of ERISA regulations, paving the way for a possible class action lawsuit due to a potential breach in fiduciary duty if the plan was not managed prudently.
If plan assets were invested in Comcast stock when it was no longer a prudent investment for participant's retirement savings, then an actionable breach under ERSIA may have occurred.
Comcast Corporation is the nation's leading provider of cable, entertainment and communications products and services with 24.2 million cable customers, 12.9 million high-speed Internet customers, and 4.1 million voice customers as at September 30, 2007. Content networks and investments include E! Entertainment Television, Style Network, The Golf Channel, VERSUS, G4, AZN Television, PBS KIDS Sprout, TV One, Comcast SportsNet and Comcast Interactive Media. Comcast also has a majority ownership in Comcast Spectacor, whose major holdings include the Philadelphia Flyers NHL hockey team, the Philadelphia 76ers NBA basketball team and two large, multipurpose arenas in Philadelphia.
