[ by Howard Haykin ]

The U.S. Supreme Court rejects employees' claims.

Thousands of Citigroup Inc. and McGraw-Hill Cos Inc. employees, who had sued their employers over significant losses in their retirement accounts, and who now sought to appeal their cases before the U.S. Supreme Court, were denied that opportunity.  The high court announced the decision on Monday,

The Supreme Court justices, without comment, rejected the workers' claims that the companies should not have offered their own stock in their retirement plans because of Citi's subprime mortgage exposure and the problems at McGraw-Hill's Standard & Poor's unit. 

The Citigroup employees initiated their lawsuit ... after Citigroup shares fell 52% from 1/1/07 to 1/15/08 - after the bank reported an $18.1 billion subprime-related loss.  The employees accused the bank of consistently playing down its exposure to subprime mortgages and other toxic debt.

In the McGraw-Hill case, workers ... took a similar approach, accusing the company of violating its fiduciary duties by offering its own stock, despite problems with its Standard & Poor's unit's ratings practices.  In both cases, the companies were accused of breaching their duties under the federal Employee Retirement Income Security Act of 1974, or ERISA.

In October 2011, the 2nd U.S. Court of Appeals in New York issued separate rulings that both companies did not abuse their discretion in offering the stock and had no duty to disclose nonpublic information about how they expected the stock to perform.  Managers of retirement plans have to remove employer stock as an investment option only if the company is in a "dire situation," the appeals court ruled.

The workers' cases are: (i) Gearren et al v. The McGraw-Hill Companies Inc et al, No. 11-1550; (ii) Gray et al v. Citigroup Inc et al, No. 11-1531.

[Reuters, 10/15/12]