During 2006 and 2007, telecommunications giant Comcast Corp. continually represented that its revenue was growing, saying “the business is on fire” and the “momentum is fantastic.” Encouraged by the company, the defined contribution plan for employees invested almost entirely in Comcast common stock.
Comcast didn’t reveal to the public that fierce competition had forced it to spend much more than expected to attract and retain customers and to upgrade its technology. For instance, before 2007, the company’s Triple Play service—offering a bundle of television, Internet, and phone service—was its main revenue generator. But much of that was based on low introductory rates that enticed customers, who canceled the service when the regular rate began.
Because of the misrepresentations, Comcast’s stock price remained artificially high. During this time, Brian Roberts, the company’s CEO and president, and Stephen Burke, its chief operating officer, sold over half of their Comcast stock.
When Comcast’s true revenue situation was revealed, the stock price fell, resulting in significant losses for plan participants.
Participant Janell Moore filed a class action against Comcast, Roberts, Burke, and several individuals who controlled the plan’s investment committee, claiming they breached their fiduciary duties under ERISA by offering company stock as an investment option when they knew it was artificially inflated and by failing to provide complete and accurate information. The class also alleged that the people responsible for overseeing the plan’s fiduciaries failed to properly monitor their performance and provide them with information they needed to make informed decisions. The class consisted of all participants in or beneficiaries of the investment plan between February 2007 and December 2007.
The parties settled for $5 million, to be distributed to class members on a pro rata basis. The defendants also agreed to provide investment advisory services for three years, send an annual diversification notice to all participants with more than 10 percent of their balance in company stock, make additional disclosures, and annually train investment committee members on their fiduciary duties.
The court has granted final approval.
Citation: In re Comcast Corp. ERISA Litig., No. 2:08-cv-00773 (E.D. Pa. Jan. 26, 2011).
Plaintiff counsel: AAJ member Michael D. Donovan, Philadelphia; AAJ members Michael Jaffe and Thomas McKenna, and Kate McGuire and Mark C. Rifkin, all of New York City.