Williams said it agreed to pay $55 million to settle a class action lawsuit Monday. The plaintiffs in the lawsuit are former employees who participated in the company’s 401(k) retirement plan during a period that began prior to July 24, 2000.

The plaintiffs alleged that the defendants breached their fiduciary duties to 401(k) plan participants related to investments in the common stock of Williams and Williams’ former subsidiary, Williams Communications Group. They alleged that the companies made “material misrepresentations to the markets” that served to inflate the price of the two companies common stock. The plaintiff also alleged that the companies failed to disclose that the communications company spin-off was not in stockholders’ best interests but was aimed at “allowing Williams to shore up its balance sheet so it could issue more stock and/or debt to acquire companies using its common stock as currency and protect its debt rating” (see Daily GPI, Jan. 30, 2002).

After Enron’s collapse, the subsequent credit crisis in the energy industry and Williams’ financial troubles associated with the communications division, WMB shares fell sharply. WMB shares fell from more than $40/share in 2000 to less than $10/share by June 2002 and less than $2/share by September 2002. WMB shares ended Monday at $24.01.

The 401(k) retirement plan continues to be under investigation by the U.S. Department of Labor.

The litigation was filed in 2002 under the Employee Retirement Income Security Act against the company, its board and members of its investment and benefits committees. Williams said $50 million of the settlement cost will be covered by insurance.

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