Michigan-based Flagstar Bancorp. has agreed to pay $3 million to participants and beneficiaries of its 401(k) plan as part of a preliminary settlement.
The complaint against the bank alleged Flagstar breached its fiduciary duty by allowing its 401(k) plan to invest in its own Flagstar common stock at a time when bank executives knew such an investment was imprudent.
The suit was filed on behalf of 401(k) participants in the plan from Dec. 31, 2006 to May 2, 2013. The Department of Labor filed an amicus brief in support of the plaintiffs in which it noted the mortgage-backed investments that Flagstar specialized in were creating significant credit risk.
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