ABB Mismanagement Cost 401(k) Plan $35.2 Million, Judge Says

ABB Ltd. (ABBN)’s U.S. unit and its retirement plan managers cost plan participants more than $35 million through breaches of fiduciary duty, a U.S. judge ruled.

ABB Inc. and managers of its Personal Retirement Investment and Savings Management (Prism) plans failed to control record- keeping fees and didn’t pursue rebates, for which U.S. District Judge Nanette K. Laughrey in Kansas City, Missouri, found them liable for $13.4 million.

They lost $21.8 million more by approving the transfer of assets from a Vanguard Group Inc. fund to a Fidelity Investments fund, she said in her 81-page March 31 ruling.

“The court finds that the plan must be compensated for its losses and any ill-gotten gains by defendants when they used plan assets for their own benefit,” Laughrey ruled, finding two Fidelity units liable for $1.7 million she called “lost float” interest earned on overnight transactions.

ABB Ltd. is a maker of power generation, transmission and distribution products, instrumentation and control systems. Its headquarters is in Zurich.

Its U.S. unit, based in Cary, North Carolina, offered union and non-union workers comparable Prism plans, matching 50 percent of participant contributions to the company’s 401(k) plan as much as 6 percent of their annual pay, according to the court’s ruling.

‘Retain Employees’

“The Prism plan was used by ABB to attract and retain employees,” Laughrey said. Fidelity Trust acted as its record- keeper.

The group lawsuit was filed in December 2006 on behalf of a class of more than 12,800 participants, according to the complaint. It was tried before Laughrey without a jury in January 2010.

“Our executives are reviewing the decision,” ABB spokesman Barry Dillon said in a telephone interview. The company is “evaluating all options including the possibility of an appeal,” he said.

Fidelity’s corporate media department didn’t immediately reply to an an after-hours e-mail request for comment.

The case is Tussey v. ABB Inc., 06cv4305, U.S. District Court, Western District of Missouri (Kansas City).

To contact the reporter on this story: Andrew Harris in Chicago at aharris16@bloomberg.net

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net

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