The US Supreme Court will dig into an Intel retirement plan that one unhappy former staffer says wrongly invested in risky funds and led to big losses in his savings.
On Monday, America's highest court said it would look at the case after Chipzilla lost a Ninth Circuit appeal over the issue. Intel is arguing that the lawsuit should be thrown out altogether because the would-be retiree took too long to sue.
The decision to accept the case follows close on the heels of another big tech retirement case: last week the Supreme Court agreed to hear a case between IBM and its unhappy employees who have also accused the company of mishandling their retirement savings.
In the IBM case, the staffers also allege that the wrong stocks were invested in. Except this time, rather than risky private equity investments or hedge funds, it was in IBM's own stock – something the plan's funders say was overvalued and the tech giant's staff knew it.
In neither case will the Supreme Court actually decide whether the tech giants have screwed their own employees but it will decide whether the cases should move forward.
In the Intel case, the chipmaker is arguing that the man suing them – former employee Christopher Sulyma – took longer than three years to act and so the whole case should be thrown out under a statute of limitations. It argues that Sulyma received a booklet outlining how the retirement fund would be managed and that marked the beginning of a three-year clock on being able to sue.
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Sulyma, unsurprisingly, does not agree, and argues that the clock should only start when someone knows what specific investments have been taken and that they were not a wise choice. He is fuming about a decision by Intel's Retirement Plans Investment Policy Committee to change its fund allocation and invest much more in hedge funds and private equity investments.
A billion here, a billion there...
His lawsuit says the committee massively increased its investment in risky hedge funds by 1,300 per cent between 2009 and 2014, and did the same with private equity investments – increasing them by 286 per cent in the same timeframe. In the end, $2.5bn was put into these investments. The heavy investment in risky funds went against what every other retirement fund was doing, the lawsuit [PDF] argues.
Those decisions led to the plan's eventual recipients "suffering hundreds of millions of dollars in losses," the lawsuit says, while also pointing to the high fees that came with the investments. Other comparable retirement funds saw a much greater increase in value.
The investment committee failed to provide employees with sufficient information about which funds they were using others' money to invest in, the lawsuit claims, and failed to investigate the risks sufficiently. The lawsuit wants the profits made by any of those involved, and an independent person put in charge of overall investment decisions in future.
But first it has to get past the Supreme Court which will look at a Ninth Court decision that Sulyma was right when he argued that the "actual knowledge" of the investments did not start when he received the retirement fund booklet but rather when he saw the investments themselves and their poor performance.
While that might seem like a logical approach, it goes against what other appeals court have decided, prompting Intel to argue that there needs to agreement across the United States on what represents "actual knowledge." It argued in its brief [PDF] that "the need for a uniform national rule is patent and urgent." And it seems the Supreme Court agrees.
In the stocks
Meanwhile in the IBM case, the Supreme Court will decide whether to uphold a lower appeals court decision to approve a trial on the question of whether IBM wrongly retained its own stock.
That claim goes back to 2013 when IBM's microelectronics division was in bad shape and Big Blue was looking to sell off the cash-burning business. The plaintiffs argue that the pensions committee, along with IBM's CFO and chief accountant, decided to hide the dire situation and overvalued the unit at $2bn in the process. IBM gave the business to GlobalFoundries in 2014 and share prices took a dive as a result. The value of the pensions pot dropped with it. ®