Suit: Frontier missteps hurt retirees
A Florida woman has sued Frontier Communications, claiming the company harmed retirees by doubling down on Verizon Communications stock, with the issue lagging mutual funds featuring more evenly distributed portfolios of stock.
Mary Reidt filed her lawsuit Tuesday in the U.S. District Court for the District of Connecticut, asking for a jury trial with no immediate demand of damages, but claiming Frontier’s failure to divest Verizon stock cost some 17,000 retirees more than $100 million, working out to more than $5,800 per retiree on average.
Reidt cited multiple violations of the Employee Retirement Income Security Act in her lawsuit, filed with representation from the West Hartford law office of Izard, Kindall & Raabe and a firm in Washington, D.C.
Frontier did not file a court response immediately. A spokesperson told Hearst Connecticut Media the company plans to do so and that the lawsuit’s claims are unfounded.
As alleged by Reidt, Frontier’s retirement plan inherited $150 million in Verizon stock in a 2010 acquisition of Verizon systems nationally, picking up another $200 million in shares after acquiring additional Verizon territories in Florida, Texas and California.
Reidt’s lawsuit describes Frontier’s decision to continue investing retirement plan assets in a single company’s stock as “a breach of their duties of loyalty, prudence, and diversification under ERISA.”
For the retirement plan in which Reidt participated, Frontier kept a full 15 percent of plan assets invested in Verizon stock, according to her claims. By contrast, a T. Rowe Price mutual fund focused exclusively on the telecommunication sector had about 2.5 percent of its assets in Verizon stock.
In her lawsuit, Reidt also highlights $114 million in AT&T stock absorbed by Frontier’s retirement plan after the company’s October 2014 buy of AT&T’s Southern New England Telephone operations in Connecticut, with the stake amounting to less than 5 percent of plan assets today.
Frontier made contributions totaling $75 million last year to its pension plan, according to the company’s annual report, and paid out $544 million to retirees while recording $378 million in investment gains, leaving it with $2.7 billion in pension assets at the close of the year. The company reported an unfunded pension obligation of $1.7 billion.
Frontier’s retirement plan committee is chaired by Leroy Barnes, a Frontier board member and experienced pension manager overseeing PG&E’s retirement plans as the former treasurer of the California utility, with other committee members including former Verizon executive Virginia Ruesterholz, former Ernst & Young partner Ed Fraioli and Mark Shapiro, former CEO of Dick Clark Productions.