(From 401(k) Specialist, Issue 3, 2016)
I think Jerome Schlichter is a “Jerky Boy.” Any Gen Xer will remember the following exchange from the totally immature and completely riotous duo who made a cynical name for themselves by recording crank calls to unsuspecting businesses in the 1990s. It was to a law firm to initiate legal action against a random defendant for unspecified damages, and predictably didn’t get far:
Jerky Boys: “Well, would it be possible to sue you people?”
Lawyer: “Sue me? Why would you sue me? What are talking about?”
Jerky Boys: “Punitive damages.”
Lawyer: “Yeah, but why would you sue me?”
Jerky Boys: “I don’t know, sue everybody!”
Schlichter, managing partner with Schlichter, Bogard and Denton, is doing just that. After high profiles cases brought against major corporations, financial services companies and a suit against a utility that made it to the Supreme Court (Tibble vs. Edison), he has his sights set on higher education. Non-profits be damned, and if you’re mishandling your employees’ 403(b), expect a call. We’re pretty sure orphanages and the Vatican are next.
Mid-August was a busy time for the tort terror, with complaints filed in various federal courts “on behalf of the employees” of Duke University, John Hopkins, The University of Pennsylvania, Vanderbilt, Massachusetts Institute of Technology, New York University and Yale.
Think that’s it? Think again. Cornell’s the latest. Andy Bernard will not be happy.
“The complaints allege breaches of the duties of loyalty and prudence under ERISA, which caused plan participants to pay millions of dollars in excessive fees for recordkeeping, administrative, and investment services,” he alleges in language that’s now pretty-much boilerplate. “The complaints also allege that the universities breached their fiduciary duties by selecting and retaining high-cost and poor performing investment options compared to available alternatives.”
Once again, any affiliated advisors-of-record will be ensnared, if not specifically named. It also serves as a wider reminder; he’ll probably go after widows and nuns, so what makes you think he won’t come for you and your plan-sponsor clients?
We asked Schlichter earlier this year if smaller plans weren’t worth his time, and could therefore continue with their questionable practices. As expected, he said absolutely not, and if he doesn’t specifically show, the high-profile nature of his work has others circling. They’re pouring through 5500s, but any exposure can be mitigated if not completely eliminated by cleaning it up now. It’ll be uncomfortable, no doubt, but nothing compared to what’s otherwise to come.