Gannett 401(k) participant sues over stock holdings in former parent company

Complaint alleges the decline in the stock cost plan participants an estimated $135 million.
MAR 26, 2018

A participant in the Gannett Co. Inc. 401(k) Savings Plan sued the company and plan executives, alleging they violated their fiduciary duties for holding too much stock in Gannett's former parent company in the 401(k) plan. "Defendants caused the plan to be undiversified by their failure to decrease the plan's substantial holdings" in 2015 and 2016 of the stock of the former parent Tegna Inc., following the spinoff in June 2015 of Gannett from Tegna, said the complaint filed March 22 in U.S. District Court in Alexandria, Va. "To the extent defendants liquidated the plan's holdings of Tegna common stock during 2017 — this will not be known until the plan files its financial statements with the Department of Labor — the timing of such liquidation was unreasonable," said the complaint in the case of Quattrone vs. Gannett Co. Inc. et al. "The plan's holdings of Tegna common stock should have been liquidated on or shortly after the date of separation," said the complaint, which seeks class-action status. The old Gannett Co. Inc. announced in August 2014 that it was renaming itself Tegna and dividing into two publicly held companies, according to court documents. After the spinoff was completed, Tegna retained the broadcasting and digital businesses while the spinoff, taking the name Gannett Co. Inc., owned the publishing assets.The 401(k) plan's stock policy cost participants an estimated $135 million based on a decline in Tegna's stock and on the gain of an index investment that could have been substituted for the Tegna stock, the complaint said. Between the spinoff and the end of 2016, the complaint alleged that Tegna's stock lost approximately $65 million. Between the end of 2016 and Feb. 20, 2018, the stock "has traded relatively flat," the complaint said. Amber Allman, a Gannett spokeswoman, said in an email that the company declined to comment. The 401(k) plan had $1.08 billion in total assets as of Dec. 31, 2016, according to its most recent Form 5500 filing. The complaint said the plan held $178.1 million in Tegna stock at the end of 2015 and $115.7 million at the end of 2016. The plan also held $83.1 million in Gannett stock at year-end 2015 and $65 million as of Dec. 31, 2016. (More: How to design a 401(k) plan that's lawsuit-proof) Robert Steyer is a reporter for InvestmentNews' sister publication Pensions&Investments.

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