* Bank accused of steering 401(k) business to win extra fees
* Morgan Stanley declines comment; ING denies wrongdoing
May 20 Morgan Stanley has been sued by an
Alabama medical laboratory that claims it steered retirement
plan business to ING U.S. Inc and others in exchange
for extra fees in an illegal "pay-to-play" scheme.
Skin Pathology Associates Inc. filed suit in federal court
in Manhattan on May 16, accusing Morgan Stanley of violating
federal laws governing retirement plans through its dealings
with co-defendant ING Life Insurance and Annuity Co and other
401(k) service providers.
The Birmingham, Alabama-based laboratory, a customer of
Morgan Stanley, is seeking class-action status on behalf of
participants in potentially thousands of retirement plans
overseen by Morgan Stanley, and retirement plans for which ING
Skin Pathology said it chose ING to handle record-keeping
for its 401(k) plan beginning in July 2007 based on the bank's
But it said Morgan Stanley was biased toward ING and other
"alliance partners" because the bank would collect additional
fees from these partners if they won contracts to provide
retirement plan investment and record-keeping services.
Skin Pathology said these fees gave New York-based Morgan
Stanley an improper incentive to make referrals, amounting to a
conflict of interest that violated the federal Employee
Retirement Income Security Act of 1974.
"The additional compensation is purely a 'pay-to-play' fee,"
the complaint said. "Because Morgan Stanley performs no
additional work for the additional compensation, Morgan
Stanley's receipt of additional compensation is a prohibited
transaction under ERISA."
Skin Pathology seeks to recover the alleged improper fees, a
halt to similar fees, and other unspecified damages.
Morgan Stanley spokesman James Wiggins declined to comment
on the lawsuit. ING spokesman Joseph Loparco said ING, which has
offices in Windsor, Connecticut, denied wrongdoing.
ING U.S., a provider of insurance, retirement and investment
services, is majority-owned by Dutch financial group ING Groep
The case is Skin Pathology Associates Inc v. Morgan Stanley
& Co et al, U.S. District Court, Southern District of New York,