One just wasn’t enough. Schlichter Bogard & Denton, home of famed fiduciary tort lawyer Jerry Schlichter, has filed a second lawsuit against Duke University, “on behalf of over 40,000 employees in its 403(b) defined contribution retirement plan.”
It’s part of a larger pattern recently of cases filed against preeminent universities alleging a fiduciary breach. Princeton, New York University, Massachusetts Institute of Technology, New York University, Yale and the University of Chicago were all targets in recent years.
The complaint, Kathi Lucas, et al., v. Duke University, was filed Monday in the U.S. District Court for the Middle District of North Carolina.
“Documents we obtained in the original excessive fee case against Duke University showed that Duke took plan assets—the retirement assets of its employees and retirees—and used those to pay salaries and fringe benefits of Duke employees, otherwise known as self-dealing, which is a prohibited transaction under ERISA,” Schlichter said when announcing the suit. “As a result, we filed this second case for these egregious breaches.”
The complaint alleges that Duke University, as an employee retirement plan sponsor, breached its fiduciary duties under ERISA by taking, for itself, part of the excess revenue sharing payments paid by the investment options to the recordkeepers of the plan.
“This revenue sharing exceeded the cost of the plan’s recordkeeping service by over $3.5 million per year, a fact that Duke has allegedly known since at least early 2010,” Schlichter added.
From 2012 to 2016, instead of recovering excess revenue sharing for the plan, Duke allegedly used these funds to pay plan expenses and to reimburse itself for its own administrative costs.
This included paying salaries and benefits to employees from Duke’s Human Resources department, “all without disclosing this information to plan participants, and without any review or approval by an independent fiduciary.
This complaint follows the suit filed on August 10, 2016, David Clark, et al., v. Duke University, et al., which alleges that Duke, as an employee retirement plan sponsor, breached its duties of loyalty and prudence under the ERISA by causing plan participants to pay millions of dollars in unreasonable and excessive fees for recordkeeping, administrative, and investment services of the plans. That suit is still pending before the court.
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.
