Employees of Pfizer Inc. have filed suit against the company, alleging the world's largest drug maker failed to properly manage its retirement plans and caused losses totaling hundreds of millions over the past decade in one of the hubs of the pharmaceutical industry.
The suit, filed Wednesday in federal court in Puerto Rico, alleges Pfizer allowed employees to amass such high concentrations of company stock that workers were extremely vulnerable to market fluctuations and says the plans could not be considered prudently managed as required by the U.S. law.
The suit also claims Pfizer withheld information that damaged workers as shareholders.
Six former employees are named, but the suit seeks class-action status. Attorney Joseph Santoli said thousands of current and former workers in Puerto Rico were affected by Pfizer retirement plans and total losses amount to "hundreds of millions" dating back to 2000.
"Part of the problem, a large part, is that these plans were extremely overweighted and concentrated in Pfizer and the other related stocks," said Santoli, who is based in Ridgewood, New Jersey.
Pfizer spokesman Christopher Loder said the company had not been served with the lawsuit but added that the claims appeared to be similar to ones raised in a case in New York that a judge largely dismissed in 2009.
"Based on our preliminary understanding, this case appears to be a reassertion of claims that were previously dismissed in a different court," Loder said. "We intend to defend vigorously any new assertion of these claims."
The plaintiffs in the New York case were allowed to proceed with some elements in the case and it's now in mediation.
Santoli said the suit filed in Puerto Rico is different because the U.S. island territory is subject to different tax and retirement plan laws. He said the claims concern only workers from the island, which is one of the world's major centers for pharmaceutical manufacturing.
The suit alleges a violation of the U.S. Employee Retirement Income Security Act of 1974, which has become the basis for many similar such actions in recent years.
The Pfizer workers allege company officers violated their duties under the law by imprudently investing assets in the plans or allowing shares to remain overly invested in the stock. Some workers amassed portfolios consisting of all or nearly all Pfizer shares, a practice widely discouraged by investment advisers, who typically urge people to diversify their assets.
The suit also makes a claim similar to shareholder class-action suits, arguing the company should have known that there were potential health risks from several of its drugs that could affect the share price and expose the company to millions from liability lawsuits.
Millions of dollars in retirement savings were lost in one day alone in December 2004 when the stock price dropped 11 percent amid negative news about the two drugs, the suit says.