Hewitt Associates settles in valuation lawsuit brought by Philips UK pension fund

Case illustrative of trend for funds to sue advisors over valuations.

The £2bn (€2.2bn) Philips Electronics UK pension fund has won a settlement in a £103m lawsuit against consulting firm Hewitt Associates – highlighting a trend where funds are seeking redress against their advisors and managers. The value of the settlement has not been disclosed. “The company paid the settlement in the third quarter of fiscal 2009,” Hewitt said in a regulatory filing late last year [2009]. At issue was a claim that US-based Hewitt failed to properly value certain benefits in connection with actuarial services it provided to Philips between 1995 and 2000. Philips and Philips Pension Trustees Ltd. filed suit in the High Court of Justice, Chancery Division, in London, against Hewitt Associates and former European consulting head Roger Parkin on August 1 2008. Philips was represented by professional negligence specialist Andrew Spink of Outer Temple Chambers, who represented the Credit Lyonnais Pension Scheme in its action against consultants Watson Wyatt in 2005. The win comes as a number ofinstitutions are taking their advisors to court over valuation issues.
The Alaska Retirement Management Board is pursuing fellow consultant for a reported $2.8bn over mistakes which it says affected its ability meet its obligations to retirees. And Dutch pension fund PFZW recently won a $15m default judgment against California-based Dunmore Capital, claiming an investment was used fraudulently to pay off Dunmore’s own debts.
Elsewhere, the pension fund of Dutch drugs firm Mediq, Stiching Pensioenfonds OPG, has been awarded €40m in a lawsuit against State Street Global Advisors. Asset manager SSGA ran most of OPG’s equities and had handed their management to the now bankrupt Lehman Brothers.
Hewitt added that its professional liability insurers have denied $20m of insurance coverage relating to the Philips suit – and that it is “litigating its coverage positions and believes substantial recovery is probable”.