Nest eggs for thousands cracked with heavy bet on one bad stock, lawsuit says

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Imprudent investing cracked the nest eggs of thousands of employees at Kansas City-based DST Systems Inc., according to a former employee’s lawsuit.

DST Systems allowed a money manager it hired to put too much of its employees’ retirement assets in one company’s stock, the lawsuit said. And that stock — shares of Valeant Pharmaceuticals International Inc. — tanked.

Amid scandal and investigations, Valeant’s stock fell from more than $260 a share to less than $15 a share in 15 months. The lawsuit said DST employees saw nearly $400 million disappear from their retirement accounts.

“They couldn’t get out of it, and they couldn’t control it,” said Ted Kapke, an attorney representing the former DST employee who sued.

A DST Systems spokeswoman said the financial services company would not comment for this article. Officials with Ruane, Cunniff & Goldfarb Inc., the money manager, could not be reached.

The incident is a new twist on an old problem that has plagued many employees’ 401(k) and similar retirement plans. They suffer stiff losses from a heavy investment in one stock, though that stock usually has been the employer’s own shares.

For example, the 401(k) plan at the former Aquila Inc. in Kansas City was stuffed with Aquila shares when the bottom dropped out of the stock’s price in 2002. Aquila’s employees were locked into the Aquila investment and powerless to move that money into a safer mix of…

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