Xerox wins lawsuit alleging 'kickback' scheme with Financial Engines

Fidelity and Voya prevailed in similar pay-to-play cases this year against 401(k) record keepers

Oct 23, 2017 @ 1:11 pm

By Greg Iacurci

Xerox HR Solutions has won a lawsuit alleging it engaged in a pay-to-play scheme with the robo-adviser Financial Engines, marking the third defeat this year for plaintiffs bringing such charges against 401(k) record keepers.

Xerox's defined contribution plan record-keeping unit now operates under Conduent Inc., following a separation from Xerox Corp. in 2017. Conduent is one of the top 10 largest DC-plan record keepers by assets.

Michigan district court judge Robert H. Cleland dismissed the lawsuit, Chendes et al v. Xerox HR Solutions, but granted plaintiffs leave to replead claims in three of the four counts made in the lawsuit by Nov. 2. Financial Engines isn't a defendant in the lawsuit.

Attorneys representing plaintiffs didn't respond to requests for comment on whether they plan to replead the counts, which included breach of fiduciary duty under the Employee Retirement Income Security Act of 1974.

The lawsuit hinged on a supposed "kickback" scheme, whereby Financial Engines, a managed-account provider made available via Xerox's record-keeping platform, paid Xerox a "significant percentage of the fees" it collected from participants in defined contribution plans offered by Ford Motor Co., plaintiffs claimed.

They said Financial Engines paid Xerox more than 30% of the fees it received from the Ford plans, claiming the percentage is "plainly unreasonable" given Xerox doesn't provide "substantial services" to Financial Engines or participants for that fee, and "wrongfully inflates" the service price for participants, according to the dismissal document published Oct. 19.

Fidelity Investments and Voya Financial Inc. recently beat back similar allegations. Another lawsuit against Aon Hewitt (the record-keeping unit of which is now Alight Solutions) is outstanding.

The Xerox lawsuit was filed in November 2016.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Gadget Girl

How Tamarac’s new platform will help advisers better engage with clients

Tamarac recently announced the launch of the Tamarac platform for Registered Investment Advisors. What can advisers expect from the completely redesigned platform?

Latest news & opinion

Raymond James executives call on industry to keep broker protocol

Also ask firms to pay for the administration of the protocol to 'ensure its longevity and relevance.'

Senate committee approves tax plan but full passage not assured

Several Republican senators expressed reservations about the bill, and the GOP cannot afford too many defections.

House passes tax bill, focus turns to Senate

Tax reform legislation expected to have more of a challenge in upper chamber.

SEC enforcement of advisers drops in Trump era

The agency pursued 82 cases against advisers and firms in fiscal year 2017, down from 98 the previous year.

PIABA accuses Finra of conflicts of interest

Public Investors Arbitration Bar Association report slams self-regulator over its picks for board of governors.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print