Sprint Nextel faces class-action from employees: Complaint says company stock was bad pension investment

While rumors swirl about a German telecom giant’s interest in acquiring Sprint Nextel Corp. to become the largest-mobile phone carrier in the United States, the No. 3 U.S. cellular operator faces a more tangible challenge: a new class-action pension lawsuit with the potential to snowball.
The class-action complaint, filed in Kansas federal court, alleges Sprint Nextel violated the Employee Retirement Income Security Act for failing to remove Sprint Nextel common stock as an investment option for employees in the face of company turbulence and a steady decline in the price of its shares. The plaintiff claims Sprint Nextel retirement savings plans have suffered tens of millions of dollars in losses as a result of the company’s actions.
“Had the defendants properly discharged their fiduciary and/or co-fiduciary duties, including the provision of full and accurate disclosure of material facts concerning investment in Sprint stock, eliminating Sprint stock as an investment option when it became imprudent, and divesting the plans from company stock offered by the plans when maintaining such an investment became imprudent, the plans would have avoided a substantial portion of the losses that it suffered through its continued investment in Sprint stock,” the lawsuit stated.
Participation in the Sprint Nextel retirement savings plan is voluntary.
“We’re in the process of reviewing the claims,” said Matthew Sullivan, a Sprint Nextel spokesman.
The lawsuit said Sprint Nextel should have known as early as May 2007 that its stock was an unwise investment for employee savings plans, noting that the company continues to downplay its troubles to this day. The lawsuit pointed to statements by Sprint Nextel CEO Dan Hesse in a Feb. 28 press release announcing disappointing fourth quarter and full-year 2007 financial results.
“Despite a concerted effort to put the best possible spin on a deteriorating situation, Sprint was in serious trouble,” states the lawsuit. “The Nextel merger created an unwieldy and inflexible corporation that failed to generate synergies of any real import. Customers were increasingly dissatisfied with service and the product line. The customers migrated to cheaper plans, offer by more nimble competitors.”
Meantime, a Pennsylvania law firm said today it is investigating whether administrators of the Sprint Nextel retirement savings plan “failed to prudently and loyally manage the plans’ investments in Sprint common stock by continuing to offer company stock when the stock was no longer a prudent investment for participants’ retirement savings.” Such follow-on suits are not uncommon.