A federal judge has ordered
Ameriprise Financial Inc. to turn over notes from a top mutual-fund executive to former employees of the firm who contend their retirement savings were funneled into costly and underperforming proprietary investments.
U.S. magistrate judge Janie S. Mayeron said this week
Ameriprise Financial Inc. must hand over notebooks belonging to William F. Truscott, the chief executive of its asset management unit, which includes Columbia Management Investment Advisers, the twelfth-largest mutual fund house in the U.S.
A group of former Ameriprise employees sought the documents in support of their claim that Mr. Truscott “coerced” administrators of their retirement plan to make use of proprietary mutual funds “to benefit Ameriprise despite the availability of lower cost and better performing investment alternatives.”
Ameriprise has denied those claims. In a court filing, its lawyers said the “theory that Mr. Truscott 'coerced' the fiduciaries is not even implicated — much less supported — by the few sentences of handwritten notes at issues.”
The development is the latest turn in a long-running class-action lawsuit,
first filed in 2011, that financial services lawyers are closely watching because of Ameriprise's unique position both as a product manufacturer and plan sponsor.
And the lawsuit — Krueger et al v. Ameriprise Financial Inc. et al, in the U.S. District Court in Minneapolis — is among several that
challenge, in one way or another, the fees charged by asset management firms as being exhorbitant.
In this case, a group of employees who were enrolled in Ameriprise's defined-contribution retirement plan said the firm breached its fiduciary duty under the Employee Retirement Income Security Act of 1974 by offering proprietary fund options that paid fees to Ameriprise and its subsidiaries as well as offering more expensive share classes than necessary of RiverSource funds, a predecessor to Columbia. The plaintiffs claimed $20 million in losses.
“We have a strong 401(k) plan and have long maintained that the suit is without merit,” said Paul W. Johnson, a spokesman for Minneapolis-based Ameriprise, who declined to comment on the ruling.
After initially resisting requests for access to Mr. Truscott's papers and electronic records, Ameriprise handed over more than 1,400 copies of those documents.
But during a May 28 deposition, Mr. Truscott revealed that — unbeknownst to his firm's lawyers or the litigants — that he had journals containing notes from business meetings that were stored apart from other papers that had already been reviewed, according to Ms. Mayeron.
Separately, Patrick T. Olk, a relationship manager for Columbia, also “identified” previously unreported “collection of handwritten notes,” which were handed over by Ameriprise last month, Ms. Mayeron said.
Ameriprise also turned over three pages from Mr. Truscott's previously unreported notebooks last month. Now the court has asked them to deliver the entire notebook.
The judge's ruling Monday also allows depositions of Mr. Truscott and Mr. Olk to be reopened in light of the new evidence.
But the ruling stopped short of making a finding requested by the former employees' lawyers that the evidence demonstrates Mr. Truscott's coercion of plan fiduciaries. The judge said doing so “would essentially establish one of the most hotly contested issues in this case — whether Ameriprise was acting to benefit itself rather than the beneficiaries of the 401(k) plan.”
“The court finds that while Ameriprise's conduct was sloppy and negligent, there are no facts before this court to suggest that it was willful, in bad faith or deliberate,” Ms. Mayeron wrote.
Heather Lea, a St. Louis-based lawyer with the firm Schlichter Bogard & Denton representing the former employees, did not respond to a phone call requesting comment.
Ameriprise's money management unit, with more than $350 billion in assets, is the product of a merger between RiverSource Investments and Columbia Management Group, whose fund management capabilities Ameriprise purchased from
Bank of America Corp. in 2010.
