A new 401(k) lawsuit against a nationwide pest-control company stands out from most others by questioning the investment guidance of an adviser to the plan.
It also names LPL Financial and Alliant as defendants, in addition to the plan sponsor — Rollins Inc. — and the plan committee.
The allegations in the Dec. 30 lawsuit differ from many of those raised in the sea of 401(k) and 403(b) excessive fee cases filed in recent years, many of which claim that plan fiduciaries should have known better than to select high-cost investment options and plan services. The complaint also extensively cites plan committee meeting minutes, material that litigators often do not obtain until the discovery process in an active case.
The recent case was brought by The Sharman Law Firm and The Pels Law Firm, which are currently outsiders in the world of defined-contribution plan litigation.
Much of the proposed class-action case points to investment guidance from a former adviser to the plan, Sean Waggoner, who is not named as a defendant. Waggoner, who is currently registered with Cetera and Alliant Retirement Consulting, directed the plan committee to several investments that had higher revenue sharing than necessary and others that lacked in performance compared with other options, according to the complaint.
The plan sponsor and committee failed to properly monitor investments and services, and also failed to monitor covered service providers, the law firms stated.
Waggoner, who did not immediately respond to a request for comment, reportedly represented to the plan that he was working with Alliant before he was affiliated with that firm, according to the complaint. The plan sponsor failed by not doing a quick internet search of his name, the plaintiffs’ law firms contend.
“Between 2009 and 2013, Waggoner was not licensed as an investment advisor with Alliant, the firm he represented himself to the administrative committee as working with,” the complaint read. Instead, he “was licensed to offer investment advice through NFP Securities, LPL Financial and James E. Bashaw & Co.”
Waggoner didn’t disclose his relationship with LPL, the complaint stated, and continued “to receive LPL’s broker-dealer related securities revenue held at Prudential.”
LPL and James Bashaw, founder of James E. Bashaw & Co., also did not immediately respond to requests for comment. Bashaw is not named as a defendant, but the complaint points to a disciplinary history and an alleged breach of fiduciary duty in June 1988 that the plan sponsor allegedly should have known about.
Bashaw had been terminated from LPL in 2014 for “participating in private securities transactions without providing written disclosure to and obtaining written approval from the firm … borrowing from a client, and … engaging in a business transaction that created a potential conflict of interest without providing written disclosure and obtaining written approval from the firm,” the complaint read.
Further, “[t]here is no evidence in any of the administrative committee meeting minutes that LPL, James Bashaw or James E. Bashaw & Co. provided any services to the Rollins Plan,” the plaintiffs’ firms wrote.
The proposed class includes participants who were in the roughly $1 billion plan from 2008 onward.
The plaintiffs allege that Alliant received excessive compensation from the plan, about $80,000 annually, which was more than three times the pay it got from other plan clients.
“Defendants Alliant Insurance Services, Inc., Alliant Retirement Services, LLC and LPL Financial LLC alienated trust assets by receiving fees though they were merely serving as ‘pass-through’ entities and not necessary for the operation of the plan,” the complaint read. “Further, despite receiving revenue from the Rollins 401(k) plan, they failed to supervise the actions of Sean Waggoner who acted as an investment advisor to the plan, especially in light of disclosure events that would cause Waggoner to be terminated by LPL.”
Waggoner’s affiliation with LPL was terminated in 2017 following a Finra investigation that found he allegedly failed to provide prior written notice to his firm about eight personal brokerage accounts, according to the complaint. He also was “not qualified to serve as a CSP to the plan because Waggoner failed to register as an investment advisor with the State of Georgia.”
The case was filed in U.S. District Court in Georgia.
The plaintiffs allege that the employer and committee breached their fiduciary duties under the Employee Retirement Income Security Act by allowing excessive record-keeping fees, selecting high cost, poorly performing investments and failing to monitor the plan’s investments generally.
The single count against Alliant and LPL involves alleged prohibited transactions between the plan and a party in interest.
Andrew is half-human, half-gamer. He’s also a science fiction author writing for BleeBot.