Santa Clara, CA: An investigation has been launched into the Eaton Corporation Plc (“Eaton Corp.”) (NYSE:ETN) on behalf of its current and former employees over the Eaton Savings Plan (the “Plan”) for potential violations of the federal Employee Retirement Income Security Act (“ERISA”).
ERISA imposes fiduciary duties to prudently manage and invest plan assets. This investigation seeks to determine whether these duties were violated by the continued offering of the Eaton Corp. stock as an investment option for employees under the Plan.
On July 22, 2016, a class action lawsuit was filed against Eaton Corp. and its chief executive and chief financial officers. The complaint alleges that Eaton and its two chief officers made misrepresentations in connection with its merger with Cooper Industries Plc. The misrepresentations concerned the impact of the merger on Eaton Corp.’s ability to strategically spin-off businesses tax-free, including its valuable automobile parts manufacturing business, to maximize value to shareholders.
On July 29, 2014, after many months of assuring investors that it could, Eaton’s CEO disclosed that it could not feasibly spin-off any businesses until 2017, and that this was known all along. Following this news which shocked investors, Eaton Corp.’s stock price fell from $76.75 per share to $70.51 per share. The lawsuit alleges that the Company’s false statements had artificially inflated its stock price since November 13, 2013, until this announcement was made.
Employees who purchased and held company stock through the Plan during November 13, 2013 through July 28, 2014, may have wrongfully suffered losses to their retirement savings. The class action lawsuit that was filed raises serious issues about whether the Plan’s fiduciaries properly executed their duties under ERISA, which is designed to protect employees’ retirement savings from imprudent and inappropriate investments.