Citigroup Inc. has reached a $6.9 million settlement with plaintiffs in a more than decade old lawsuit alleging the financial services firm stuffed its retirement plan with expensive in-house investments, thereby enriching the company at the expense of its employees.
The lawsuit, Leber v. Citigroup Inc. et al, was originally filed in October 2007 in the U.S. District Court for the Southern District of New York. Plaintiffs claimed the company breached its fiduciary duty by including high-cost, underperforming investment products managed by Citigroup subsidiaries and affiliates — including Smith Barney and Salomon Brothers — in the Citigroup 401(k) plan.
Parties filed for the proposed settlement Aug. 1. Citigroup didn't admit to wrongdoing as part of the proposed settlement, which still must be approved by the judge. Citigroup spokesman Mark Costiglio declined to comment.
The eligible class of plaintiffs in the class-action lawsuit includes participants in the Citigroup 401(k) plan who invested in one of nine in-house funds between Oct. 18, 2001, and Dec. 1, 2005. The Citigroup plan has roughly $12 billion in assets and more than 144,000 participants,
according to BrightScope Inc.
A slew of asset managers, primarily those focused on active management of their investments, have
been sued in recent years over self-dealing via proprietary funds in their 401(k) plans.
Citigroup joins a handful of other financial services firms that have settled in these cases. Over 2017-18, for example, American Airlines, Allianz, TIAA and New York Life settled for
$22 million,
$12 million,
$5 million and
$3 million, respectively. Some lawsuits, such as those against Wells Fargo & Co., Capital Group and Putnam Investments, have
been dismissed.
(More: Jerry Schlichter's fee lawsuits have left an indelible mark on the 401(k) industry)
