As Caesars Entertainment actively works to emerge from the global COVID-19 pandemic, the casino, and sports gambling operator is going to have to reallocate some of its resources. The company is being sued, along with a fund manager, for fiduciary irresponsibility in relation to its 401(k)-employee retirement plan. According to the class-action lawsuit filed in Nevada last week, the mismanagement of the fund has cost participants millions of dollars in potential investment earnings.
Caesars Failed to Provide Proper Oversight
According to the lawsuit, Thomson v. Russell Inv. Mgmt. LLC, Caesars, and Russell Investment Management LLC have been negligent in maintaining proper control of the 401(k) fund. Caesars is accused of not monitoring Russell Investment, which manages the fund, and the investment company is being accused of moving fund money to its own “struggling funds” to try to give them a boost. The suit alleges that the moves took advantage of $1.4 billion in investment money “at a critical time when other plan sponsors were leaving Russell’s funds.”
The lawsuit further alleges that Russell failed to promote the best interests of Caesars’ 401(k) plan participants and that it chose to ignore the plan’s existing strategy that invested in “leading funds that consistently outperformed Russell’s funds at similar or lower levels of risk.” As a result, the investment company’s actions led to over $100 million in lost investment earnings. According to the lawsuit, the plan didn’t need any changes since it was performing well and had a solid track record of success, and Russell Investment’s actions were only designed to counter the company’s losses.
Breach of Federal Law
The class-action lawsuit was filed on behalf of 42,000 participants of the 401(k) plan, the Caesars Entertainment Corporation Savings & Retirement Plan. It targets Caesars for not having provided the necessary guidance of how the fund’s money was being invested and targets Russell Investments for transferring the $1.4 billion to funds that it knew were failing. The company began managing the retirement plan in 2017 when Caesars was emerging from bankruptcy.
Caesars is also being targeted for having dropped its 401(k)-investment matching plan, which it stopped in 2009 and didn’t restart for three years. Even after the company began making matching contributions, it capped the level to $600 per person a year, below the 50% match that had previously been stipulated. In turning over management of the 401(k) plan to Russell Investments and not providing subsequent oversight, Caesars is accused of violating the Employee Retirement Income Security Act of 1974. The company hasn’t commented on the lawsuit, but Russell Investment asserts the suit is “without merit” and plans on challenging the allegations.