Merrill Lynch ERISA Lawsuit Investigation

Minneapolis, MNCurrent and former employees of Merrill Lynch & Co. are investigating a possible lawsuit against the company, alleging it violated the Employee Retirement Income Security Act of 1974 (ERISA). Those who would be affected by the potential lawsuit are participants and beneficiaries of the Merrill Lynch Employee Stock Ownership Plan.

Merrill Lynch is currently under investigation by the SEC for alleged deals to hide exposure to high-risk mortgage debt, possibly putting the company's retirement funds at risk. Such actions would constitute a breach of fiduciary duties under ERISA on the part of the 401(k) plan administrators. A breach of fiduciary duty means that the person who has discretion over the management of a plan's assets has made imprudent investments.

Plan administrators may have breached their fiduciary duty by misrepresenting facts regarding the plan's assets or by investing the plan in Merrill Lynch common stock when it was irresponsible to do so because of Merrill Lynch's problems with mortgage-related investments.

Meanwhile, a lawsuit was filed in Hartford alleging that officers and directors of Merrill Lynch violated securities laws. The suit seeks class action status on behalf of anyone who purchased Merrill Lynch common stock between February 26, 2007 and October 23, 2007. According to the lawsuit, Merrill Lynch did not disclose how exposed to Collateralized Debt Obligations (CDOs) it was and made false Class Period statements by not informing the public that those CDOs would seriously affect the company's portfolio.

The lawsuit follows an announcement by Merrill Lynch that the company has $8.4 billion in losses—more than three billion dollars more than it had warned about just weeks before the announcement. The losses were caused partly by problems with mortgage-related investments. These same losses have also triggered the investigation into possible lawsuits from 401(k) plan participants and the SEC investigation.

Although officials at Merrill Lynch say they have the situation under control, critics of Merrill Lynch point out that former executives repeatedly maintained through the summer and fall that its credit problems were under control, only to announce the $8.4 billion in losses.

If Merrill Lynch plan administrators are found to have breached their fiduciary duties by investing in Merrill Lynch common stock, plan participants and beneficiaries would be eligible to join a lawsuit against the company.