The Massachusetts Institute of Technology has reached an agreement in principle to settle a lawsuit in which its 401k participants alleged a breach of fiduciary duty due to an improper relationship with Fidelity Investments, the nation’s largest recordkeeper.
“Just days ahead of the start of the trial, MIT and the plaintiffs said in a court filing that they had reached the deal and are asking the court for 45 days in order for the details to be finalized and prepared for consideration by the court,” NPR reported Wednesday.
The case drew widespread attention due to allegations that Fidelity “received millions of dollars of excessive payments from MIT’s 401k Plan,” according to the initial filing.
MIT made those payments, it claimed, in part because of an expectation that Abigail Johnson, Fidelity Investment’s CEO and co-owner, would donate to MIT.
Plaintiffs were represented by Jerry Schlichter, managing partner of Schlichter Bogard & Denton, who argued before the Supreme Court in Tibble v. Edison International, and targeted a number of venerable institutions recently over their supposed fiduciary failings, including Duke University, John Hopkins, The University of Pennsylvania, Vanderbilt, New York University, and Yale.
The supposed quid pro quo relationship was purportedly summed up by the dean of MIT’s Sloan School of Management: “If we’re not switching to Vanguard or TIAA-CREF, I am going to expect something big and good coming to MIT from the Johnson family.”
Soon thereafter, Schlichter alleged, “Fidelity donated $5 million to MIT—its largest donation in over 15 years.”
Fidelity and MIT vehemently responded
Fidelity and MIT vigorously denied the allegations.
“As you may know, Fidelity is not a defendant in this case,” Vincent G. Loporchio, Senior Vice President, Corporate Communications with Fidelity Investments, said in response to the case’s filing in August. “However, I would note that the judge previously dismissed a claim to this effect from the case, and nothing new has come to light that makes this story any more plausible now than it was then. Consequently, we believe that these assertions are completely fictional and wholly irresponsible.”
For example, Loporchio added, the Fidelity employee quoted in Schlichter’s press release was actually an MIT employee, which he said “is one of many other falsehoods.”
Kimberly Allen, Director of Media Relations and Deputy Director, MIT News Office, also noted at the time that Schlichter’s allegations were previously dismissed.
“As a general matter, MIT does not comment on pending litigation. However, we are compelled to respond because the press release issued yesterday by Schlichter, Bogard & Denton focuses on an unsupported claim that has already been dismissed by the court very early on in the litigation,” Allen said. “MIT is proud of the careful work of the voluntary faculty and senior administrative staff members of the internal committee overseeing MIT’s supplemental 401(k) plan.”
MIT offers “a comprehensive and competitive suite of retirement benefits to faculty and staff, including a defined benefit pension plan funded entirely by the Institute and a supplemental 401(k) plan with a 100% MIT match on employee contributions up to 5% of their pay,” she added. “The lawsuit against MIT and these committee members, individually, is one of many cases filed against universities by the same law firm. MIT has and will continue to vigorously defend against the claims asserted in this lawsuit.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
