Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 1 of 104 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION

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1 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 1 of 104 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION THEODORE NOWAK and GARY BROCKWAY, Individually and On Behalf of All Others Similarly Situated, vs. Plaintiffs, FORD MOTOR COMPANY, ELIZABETH ACTON, MICKEY BARTLETT, W. WAYNE BOOKER, MICHAEL CHILEN, J. GORDON CHRISTY, FELICIA FIELDS, KATHLEEN GALLAGHER, ALLAN GILMOUR, JAMES KEEFER, JOSEPH W. LAYMON, DONAT R. LECLAIR, DAVID G. LEITCH, PATRICIA LITTLE, MALCOLM MACDONALD, LEE MEZZA, DAVID MURPHY, JAMES J. PADILLA; ANN MARIE PETACH, KIMBERLY PLUMMER, CARL E. REICH- ARDT, JOHN M. RINTAMAKI, DENNIS E. ROSS, NICHOLAS V. SCHEELE, PETER SHERRY, JR., DENNIS TOSH, INVESTMENT PROCESS COMMITTEE OF THE FORD MOTOR COMPANY SAVINGS AND STOCK INVESTMENT PLAN FOR SALARIED EMPLOYEES; INVESTMENT PROCESS OVERSIGHT COMMITTEE OF THE FORD MOTOR COMPANY SAVINGS AND STOCK INVESTMENT PLAN FOR SALARIED EMPLOYEES, INVESTMENT PROCESS COMMITTEE OF THE FORD MOTOR COMPANY TAX EFFICIENT ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Consolidated Cases Master Case No. 06-cv Honorable Paul V. Gadola Magistrate Steven D. Pepe i

2 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 2 of 104 SAVINGS PLAN FOR HOURLY EMPLOYEES; INVESTMENT PROCESS OVERSIGHT COMMITTEE OF THE FORD MOTOR COMPANY TAX EFFICIENT SAVINGS PLAN FOR HOURLY EMPLOYEES AND JOHN AND JANE DOES 1-20, Defendants. ) ) ) ) ) ) ) CONSOLIDATED COMPLAINT FOR VIOLATIONS OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT ii

3 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 3 of 104 TABLE OF CONTENTS I. INTRODUCTION...1 II. NATURE OF THE ACTION...1 III. JURISDICTION AND VENUE...4 IV. PARTIES...4 A. Plaintiffs...4 B. Defendants...5 V. THE PLANS...11 A. The Salaried Plan...12 B. The Hourly Plan...15 VI. DEFENDANTS FIDUCIARY STATUS...17 A. The Nature of Fiduciary Status under ERISA...17 B. The Company The Company s Fiduciary Status under the Salaried Plan The Company s Fiduciary Status under the Hourly Plan...22 C. The Executive Officer Defendants...23 D. The VP Defendants The VP Defendants Fiduciary Status under the Salaried Plan The VP Defendants Fiduciary Status under the Hourly Plan...26 E. The IPC Defendants The IPC Defendants Fiduciary Status under the Salaried Plan The IPC Defendants Fiduciary Status under the Hourly Plan...30 F. IPOC Defendants The IPOC Defendants Fiduciary Status under the Salaried Plan The IPOC Defendants Fiduciary Status under the Hourly Plan...32 iii

4 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 4 of 104 VII. FACTS BEARING ON FIDUCIARY BREACH...33 A. Ford Stock Was an Imprudent Investment for the Plans during the Class Period Because of its Serious Mismanagement, Precipitous Decline in the Price of its Stock and Dire Financial Condition Background Ford s Outdated Business Strategy, Operational Errors and Poor Prospects The Visteon Spin-Off and Bail-Out Ford s Under-funded Pension Plans and Health Care Liability Mortgaging the Blue Oval Common Financial Measures Showed Continually During the Class Period that Ford Is in Dire Financial Condition...50 B. Defendants Knew or Should Have Known That Ford Stock Was an Imprudent Investment for Participants Retirement Savings...57 C. Defendants Failed to Provide Plan Participants with Complete and Accurate Information about the True Risks of Investment in Ford Stock in the Plans...59 D. Defendants Suffered From Conflicts of Interest...61 E. Rather Than Taking Meaningful Action to Protect the Plan and Prevent Large Losses, Defendants Acted In Their Own Self- Interest...63 VIII. THE RELEVANT LAW...66 IX. ERISA 404(c) DEFENSE INAPPLICABLE...69 X. DEFENDANTS INVESTMENT IN FORD STOCK IS NOT ENTITLED TO A PRESUMPTION OF PRUDENCE...70 XI. PLAINTIFFS ARE NOT OBLIGATED TO EXHAUST ADMINISTRATIVE REMEDIES...73 A. While claims for benefits and other contractual matters under ERISA are subject to an exhaustion requirement, claims for breach of fiduciary duty are not...73 B. Exhaustion of Administrative Remedies for Plaintiffs Multibillion Dollar Breach of Fiduciary Claims Would Have Been Futile History of claims procedures under the Plans...74 a. Claims procedures were appended to the Salaried Plan in 2002 and iv

5 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 5 of 104 b. Claims procedures were appended to the Hourly Plan in between 1999 and 2003 and again in Exhaustion under either Plan during the Class Period would have been futile...76 XII. CAUSES OF ACTION...78 A. Count I: Failure to Prudently and Loyally Manage the Plans and Assets of the Plans...78 B. Count II: Failure to Monitor Fiduciaries...85 C. Count III: Co-Fiduciary Liability...87 XIII. CAUSATION...90 XIV. REMEDY FOR BREACHES OF FIDUCIARY DUTY...91 XV. CLASS ACTION ALLEGATIONS...92 XVI. PRAYER FOR RELIEF...94 v

6 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 6 of 104 INDEX OF DEFINED TERMS Term Page 1997 Trust Agmt Salaried Plan 11-K Salaried Plan Salaried Plan 11-K Salaried Plan 11-K Hourly Plan Hourly Plan 11-K Salaried Plan Salaried Plan 11-K Salaried Plan 11-K Trust Agmt K Salaried Plan... 8 Apr. 6, 2006 Amend Class Class Period... 2 Company... 1 Cooper... 4 ERISA... 1 ESOP Executive Officer Defendants... 7 Final 404(c) Reg Ford... 1 Ford Credit... 5 IPC... 8 IPC Defendants IPOC... 8 IPOC Defendants May 23, 2005 Ltr McCracken Monitoring Defendants Ousachi... 5 Plaintiffs... 1 Prudence Defendants SEC... 1 VP Defendants... 7 vi

7 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 7 of 104 I. INTRODUCTION 1. Plaintiffs David Cooper and Mark Ousachi ( Plaintiffs ) 1 allege the following based upon personal information as to themselves and the investigation of Plaintiffs counsel, which included a review of U.S. Securities and Exchange Commission ( SEC ) filings by Ford Motor Company ( Ford or the Company ), including Ford s proxy statements (Form 14A), annual reports (Form 10-K), quarterly reports (Form 10-Q), and current reports (Form 8-K), and the annual reports (Form 11-K) filed on behalf of (a) the Ford Motor Company Savings and Stock Investment Plans for Salaried Employees (as amended from time to time, the Salaried Plan ); and (b) the Ford Motor Company Tax-Efficient Savings Plans for Hourly Employees (as amended from time to time, the Hourly Plan and with the Salaried Plan the Plans ), a review of the Forms 5500 filed by the Plans with the U.S. Department of Labor, interviews with participants of the Plans, a review of available documents governing the operations of the Plans, and information regarding the Plans and the identities of Plan fiduciaries produced to Plaintiffs by Ford. Plaintiffs believe that substantial additional evidentiary support will exist for the allegations set forth herein after a reasonable opportunity for discovery. II. NATURE OF THE ACTION 2. This is a class action brought on behalf of the Plans pursuant to 502(a)(2) and (a)(3) of the Employee Retirement Income Security Act ( ERISA ), 29 U.S.C. 1132(a)(2) & (a)(3), against the fiduciaries of the Plans for violations of ERISA. 1 Plaintiffs Cooper and Ousachi were designated Lead Plaintiffs in the Court s March 27, 2007 Consolidation Order. This Consolidated Complaint is being filed under the same caption as that used in the Consolidation Order. Counsel intends to move the Court to amend the caption reflecting the consolidation of this matter. 1

8 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 8 of The Plans are retirement plans sponsored by Ford. Upon information and belief the Plans or elements thereof are intended to be qualified under the Internal Revenue Code as socalled 401(k) plans. 4. Plaintiffs claims arise from the failure of Defendants, who are fiduciaries of the Plans, to act solely in the interest of the participants and beneficiaries of the Plans, and to exercise the required skill, care, prudence, and diligence in administering the Plans and the Plans assets from April 15, 2000 to the present (the Class Period ). 5. Plaintiffs allege that Defendants allowed the heavy, imprudent investment of the Plans assets in Ford common stock throughout the Class Period despite the fact that they clearly knew or should have known that such investment was imprudent due to, among other things, (a) the fact that Ford s core legacy business the manufacture and distribution of automobiles was suffering from an outdated business strategy and a significant loss of market share; (b) the nearcomplete failure of the spin-off of its former parts-making subsidiary, Visteon; (c) massive under-funding of Ford s pension and health care plans and concomitant rising healthcare expense; (d) Ford s skyrocketing debt-equity ratio; and (e) the steady weakening of the Company s financial position, to the point that there is a serious question as to Ford s viability given its massive debt, declining revenue, and fundamental problems that beset the company. 6. Specifically, Plaintiffs allege in Count I that the Defendants who were responsible for the investment of the Plans assets breached their fiduciary duties to the Plans participants in violation of ERISA by failing to prudently and loyally manage the Plans investment in Ford stock. In Count II, Plaintiffs allege that the Defendants, who were responsible for the selection, monitoring and removal of the Plans other fiduciaries, failed to properly monitor the performance of their fiduciary appointees and remove and replace those whose performance was inade- 2

9 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 9 of 104 quate. In Count III, Plaintiffs allege that Defendants breached their duties and responsibilities as co-fiduciaries by failing to prevent breaches by other fiduciaries of their duties of prudent and loyal management, complete and accurate communications, and adequate monitoring. 7. As more fully explained below, during the Class Period, Defendants imprudently permitted the Plans to hold and acquire billions of dollars in Ford stock despite the fundamental problems the Company faced. Based on publicly available Plan information, it appears that Defendants breaches have caused the Plans to lose over six billion dollars of retirement savings. 8. This action is brought on behalf of the Plans and seeks losses to the Plans for which Defendants are personally liable pursuant to ERISA 409 and 502(a)(2), 29 U.S.C. 1109, and 1132(a)(2). In addition, under 502(a)(3) of ERISA, 29 U.S.C. 1132(a)(3), Plaintiffs seek other equitable relief from Defendants, including, without limitation, injunctive relief and, as available under applicable law, constructive trust, restitution, equitable tracing, and other monetary relief. 9. ERISA 409(a) and 502(a)(2) authorize participants such as Plaintiffs to sue in a representative capacity for losses suffered by the Plans as a result of breaches of fiduciary duty. Pursuant to that authority, Plaintiffs bring this action as a class action under Fed. R. Civ. P. 23 on behalf of all participants and beneficiaries of the Plans whose Plan accounts were invested in Ford common stock during the Class Period. 10. In addition, because the information and documents on which Plaintiffs claims are based are, for the most part, solely in Defendants possession, certain of Plaintiffs allegations are made by necessity upon information and belief. At such time as Plaintiffs have had the opportunity to conduct discovery, Plaintiffs will, to the extent necessary and appropriate, amend 3

10 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 10 of 104 this Complaint, or, if required, seek leave to amend, to add such other additional facts as are discovered that further support Plaintiffs claims. III. JURISDICTION AND VENUE 11. Subject Matter Jurisdiction. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C and ERISA 502(e)(1), 29 U.S.C. 1132(e)(1). 12. Personal Jurisdiction. ERISA provides for nationwide service of process. ERISA 502(e)(2), 29 U.S.C. 1132(e)(2). All of the Defendants are either residents of the United States or subject to service in the United States and this Court therefore has personal jurisdiction over them. This Court also has personal jurisdiction over them pursuant to Fed. R. Civ. P. 4(k)(1)(A) because they would all be subject to the jurisdiction of a court of general jurisdiction in the State of Michigan. 13. Venue. Venue is proper in this district pursuant to ERISA 502(e)(2), 29 U.S.C. 1132(e)(2), because the Plans are administered in this district, some or all of the fiduciary breaches for which relief is sought occurred in this district, and/or some Defendants reside and/or transact business in this district. IV. PARTIES A. Plaintiffs 14. Plaintiff David Cooper ( Cooper ) is a resident of Wayne County, Michigan. Cooper worked for Ford beginning in 1986 and is still employed by Ford. He has been a participant in the Salaried Plan within the meaning of ERISA 3(7), 29 U.S.C. 1002(7), during the Class Period and held shares in his retirement account in the Salaried Plan during the Class Period. 4

11 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 11 of Plaintiff Mark Ousachi ( Ousachi ) is a resident of Oakland County, Michigan. Ousachi worked for Ford from May 2000 to December He has been a participant in the Salaried Plan within the meaning of ERISA 3(7), 29 U.S.C. 1002(7), during the Class Period and held shares in his retirement account in the Salaried Plan during the Class Period. B. Defendants 16. Defendant Ford Motor Company. Ford is a Delaware corporation with its principal executive offices at One American Road, Dearborn, Michigan. The Company designs, manufactures, markets and distributes automobiles worldwide. According to its website, Ford employs approximately 300,000 employees and has 108 plants worldwide. The Company s core and affiliated automotive brands include Ford, Jaguar, Land Rover, Lincoln, Mazda, Mercury and Volvo. In addition to its automobile manufacturing business, Ford s other principal business unit is the Ford Motor Credit Company ( Ford Credit ), which offers financial products and financing to automobile dealerships both throughout North America and worldwide. Ford common stock is listed on the New York Stock Exchange and trades under the ticker symbol F. 17. Vice President Defendants. As explained more fully below, the Plans assign fiduciary responsibilities and duties to several Ford Vice Presidents ( VPs ), including responsibility for managing the Plans investments and appointing other Plan fiduciaries. From the beginning of the Class Period to May 10, 2005, the Hourly Plan assigned such responsibilities to the VP Human Resources, VP Finance and Treasurer and VP General Counsel. From May 11, 2005 to the present, the Hourly Plan has assigned such responsibilities to the Group VP Human Resources and Labor Affairs, Executive VP and Chief Financial Officer and Senior VP General Counsel. From the beginning of the Class Period to at least December 11, 2002, the 5

12 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 12 of 104 Salaried Plan assigned such responsibilities to the VP Human Resources, VP and Treasurer and VP General Counsel. Between December 11, 2002 and April 1, 2004, the Salaried Plan was amended to assign such responsibilities to the Group VP Human Resources, VP Finance and Treasurer and VP General Counsel. From May 11, 2005 to the present, the Salaried Plan has assigned such responsibilities to the Group VP Human Resources and Labor Affairs, Executive VP and Chief Financial Officer and Senior VP General Counsel. On information and belief, the individual VP Defendants are as follows: (a) Defendant Elizabeth Acton, who served as VP and Treasurer for Ford from October 2000 to April 2002; (b) Defendant Joseph W. Laymon, who has served as Ford s Group VP Corporate Human Resources and Labor Affairs since October 2003; (c) Defendant Donat R. Leclair, who has served as Ford s Executive VP and Chief Financial Officer since August 2003; (d) Defendant David G. Leitch, who has served as Ford s Senior VP and General Counsel since April 2005; (e) Defendant Malcolm Macdonald, who served as VP and Treasurer for Ford during part of the Class Period and retired from Ford effective April 1, 2005; (f) Defendant David Murphy, who served as VP of Human Resources for Ford during part of the Class Period; (g) Defendant Ann Marie Petach, who served as VP and Treasurer for Ford until March 2007; (h) Defendant Dennis E. Ross, who served as Ford s VP General Counsel from October 2000 until 2005; and 6

13 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 13 of 104 (i) Other employees of Ford who served in the positions enumerated above but are currently unknown to Plaintiffs. The identities of the persons specified in (i) are unknown to Plaintiffs. Once the identities of these fiduciaries are ascertained, Plaintiffs will seek leave to join them under their true names. The persons specified in this 17 are the VP Defendants. 18. Executive Officer Defendants. As explained more fully below, the Plans assign fiduciary responsibilities and duties to the Company s Chief Operating Officer, Chief of Staff, and Vice Chairman. Specifically these Ford officers, listed below (the Executive Officer Defendants ), have discretionary authority to determine the amount of, and whether to suspend or restore, Company matching contributions made pursuant to the Plans: (a) Defendant James J. Padilla, who served as Ford s Chief Operating Officer, President, and a member of Ford s Board of Directors during the Class Period, from February 2005 to June 2006; (b) Defendant Nicholas V. Scheele, who served as Ford s Chief Operating Officer and a member of Ford s Board of Directors during the Class Period, from October 2001 to approximately December 2004; (c) Defendant John M. Rintamaki, who served as Ford s Chief of Staff during the Class Period to approximately February 2003; (d) Defendant Carl E. Reichardt, who served as a Ford Vice Chairman from October 2001 to approximately June 2002; (e) Defendant Allan Gilmour, who served as a Ford Vice Chairman and Ford s Chief Financial Officer from May 2002 to approximately January 2005; 7

14 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 14 of 104 (f) Defendant W. Wayne Booker, who served as a Ford Vice Chairman from November 1996 to December 2001; and (g) Other individuals who served as Ford s Chief Operating Officer, Chief of Staff, or Vice Chairman during the Class Period. The identities of the persons specified in (g) are unknown to Plaintiffs. Once the identities of these fiduciaries are ascertained, Plaintiffs will seek leave to join them under their true names. The persons specified in this 18 are the Executive Officer Defendants. 19. Committee Defendants. The Salaried and Hourly Plans each authorize the creation of an Administration Committee, 2 an Investment Process Committee ( IPC ) and as of May 11, 2005 an Investment Process Oversight Committee ( IPOC ), each of which is involved in the operation, management, and administration of the Plans. See Ford Motor Co. Savings and Stock Investment Plan for Salaried Employees, as amended through April 1, (Bates nos. ER00674-ER00757) (Exhibit A) (hereafter 2004 Salaried Plan ) (pertaining to before May 11, 2005); Ford Motor Co. Savings and Stock Investment Plan for Salaried Employees, as amended through April 13, , 11.4 (Bates nos. ER00081-ER00169) (Exhibit B) (hereafter 2006 Salaried Plan ) (pertaining to after May 10, 2005) 3 ; Agreement Concerning Tax-Efficient 2 According to Ford s counsel, the Administrative Committee had no authority over plan investments or participant communications. Based on this representation, Plaintiffs do not name the Administrative Committee members and the persons who appointed them as Defendants at this time. To the extent discovery establishes that the Administrative Committee in fact exercised fiduciary authority or responsibility pertaining to the management or administration of Plan investments or communications with Plan participants, Plaintiffs will seek leave to amend this Consolidated Complaint as necessary and appropriate. 3 Both the Hourly Plan and Salaried Plan have been amended and restated several times during the Class Period. This Consolidated Complaint discusses the Plans both as currently constituted and as they existed at specific times during the Class Period. Unless otherwise specified, undated citations herein to the Salaried Plan refer to the 2006 Salaried Plan as amended to date, 8

15 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 15 of 104 Savings Plan for Hourly Employees and Ford Motor Company Tax Efficient Savings Plan for Hourly Employees, dated September 15, 2003, XX (Bates nos. ER00001-ER00052) (Exhibit C) (hereafter 2003 Hourly Plan ) (pertaining to before May 11, 2005); 4 Letter by Lee Mezza to Dan Wainaina, Apr. 6, 2006, Attach. B XX(2)(a), (b) (Bates nos. ER00422-ER00432) (Exhibit D) (hereafter Apr. 6, 2006 Amend. ) (pertaining to amendments to Hourly Plan effective after May 10, 2005). The Committee Defendants are as follows. 20. IPC Defendants. Before May 11, 2005, both Plans provided that the IPCs be created by designated VP Defendants. Effective May 11, 2005, both Plans were identically amended to provide that the IPC would be constituted of the Director Trading, the Director Asset Management and the Manager Savings and Executive Retirement Plans, North America. Id. Attach. XX(2)(b); 2006 Salaried Plan 11.4(b). During the Class Period, according to information provided by Defendants counsel, the persons listed below served as members of the IPC. When available, the corporate position occupied by each person is provided. (a) (b) (c) (d) (e) Defendant Mickey Bartlett, Defendant Michael Chilen, Defendant J. Gordon Christy, Defendant Kathleen Gallagher, Defendant James Keefer, on information and belief of Plaintiffs counsel, by various amendments provided by Defendants counsel to Plaintiffs counsel. Plaintiffs counsel has assumed that (1) all amendments, facially actual or proposed, provided by Defendants counsel were ultimately duly adopted and form part of the plan and (2) there are not other amendments. 4 Unless otherwise specified, undated citations herein to the Hourly Plan are to the 2003 Hourly Plan as amended to date, subject to the qualifications described in note 3. 9

16 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 16 of 104 (f) (g) (h) (i) Defendant Patricia Little, Defendant Lee Mezza, Defendant Kimberly Plummer, and Defendant Dennis Tosh, who served as a Director of Trading for Ford. In addition, the IPC members were permitted under the Plans to designate alternates. The identities of any persons designated as alternates are unknown to Plaintiffs. If Plaintiffs determine that alternates were designated and ascertain their identities, then Plaintiffs will seek leave to join them under their true names. The persons specified in this 20 are the IPC Defendants. 21. IPOC Defendants. Effective May 11, 2005, both Plans were identically amended to establish an IPOC and provide that the IPOC would be constituted of the VP Treasurer, Associate General Counsel and Secretary and the VP, Human Resources. Apr. 6, 2006 Ltr. Amend., Attach. XX(2)(a); 2006 Salaried Plan 11.4(a). Where available, the corporate position occupied by each person is provided: (a) Defendant Felicia Fields, who has served as VP of Human Resources for Ford since 2005; (b) (c) Defendant Ann Marie Petach; Defendant Peter Sherry, Jr., who has served as Secretary for Ford since 1995 and as an Associate General Counsel for Ford since The IPOC members were permitted under the Plans to designate alternates. The identities of any persons designated as alternates are unknown to Plaintiffs. If Plaintiffs determine that alternates were designated and ascertain their identities, then Plaintiffs will seek leave to join them under their true names. The persons specified in this 21 are the IPOC Defendants. 10

17 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 17 of John and Jane Does Plaintiffs do not currently know the identity of all of the Plans fiduciaries during the Class Period, including but not limited to the fiduciaries who appointed the members of the IPOC. Therefore, some of the fiduciaries are named fictitiously, as Defendants John and Jane Does Once their true identities are ascertained, Plaintiffs will seek leave to join them under their true names. V. THE PLANS 23. The Plans, sponsored by Ford, are employee pension benefit plans, as defined by 3(2)(A) of ERISA, 29 U.S.C. 1002(2)(A). The Plans are legal entities that can sue and be sued. ERISA 502(d)(1), 29 U.S.C. 1132(d)(1). However, in a breach of fiduciary duty action such as this, the Plans are neither defendants nor plaintiffs. Rather, pursuant to ERISA 409, 29 U.S.C. 1109, and the law interpreting it, the relief requested in this action is for the benefit of the Plans and their participants and beneficiaries. 24. The assets of an employee benefit plan, such as the Plans here, must be held in trust by one or more trustees. ERISA 403(a), 29 U.S.C. 1103(a). During the Class Period, the assets of both Plans were held in a trust by Fidelity Management Trust Company ( Fidelity ) pursuant to the same trust agreement. See Master Trust Agreement dated as of September 30, 1995, as amended and restated as of October 25, 1997 ( 1997 Trust Agmt. ); Master Trust Agreement Amended and Restated as of January 1, 2005 ( 2005 Trust Agmt. ). 25. Certain ERISA plans contain an Employee Stock Ownership Plan ( ESOP ) component that is intended to be deemed an eligible individual account plan designed to invest primarily in employer securities pursuant to ERISA 407(d)(6), 29 U.S.C. 1107(d)(6). (ERISA plans otherwise may not hold employer securities.) The Plans include purported ESOP 11

18 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 18 of 104 components. On information and belief, neither Plan satisfied all of the statutory and regulatory mandates with respect to ESOP design and/or operation. A. The Salaried Plan 26. The Salaried Plan was established effective February 1, 1956 to encourage and facilitate systematic savings and investment by eligible employees of Ford Motor Company and to provide them with an opportunity to become stockholders of the Company Salaried Plan at Bates no. ER Salaried Plan participation is voluntary. 27. The Salaried Plan provides benefits, except in limited circumstances, for all fulltime salaried employees and certain temporary employees. An employee becomes eligible to participate in the Salaried Plan as of the first day of the second calendar month immediately following such [e]mployee s original date of hire Salaried Plan 2.1. Participants become eligible to receive Company matching contributions after twelve months of service Salaried Plan 3.1(d). 28. An account is maintained for each participant, reflecting all contributions and the participant s share of earnings or losses for each respective investment fund. Participants account balances are comprised of their contributions, Company contributions, if any, and investment income earned from the individual investment options selected by the participant. Ford Motor Co. Savings and Stock Investment Plan for Salaried Employees, Annual Report (Form 11-K) (Dec. 31, 2005) at 5 ( 2005 Salaried Plan 11-K ). 29. Participants can elect to contribute a portion of their eligible pre-tax compensation through reductions of their payroll, up to 50 percent of their eligible wages on a pre-tax and/or after-tax basis Salaried Plan 3.1(a), (b). (At the beginning of the Class Period, the maxi- 12

19 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 19 of 104 mum contribution percentage was 25 percent. It was increased to 40 percent effective April 1, 2002 and to 50 percent effective April 1, 2004.) 30. One of the investment options available to participants is the Ford Stock Fund, which should be, and should continue to be invested exclusively in Company Stock Salaried Plan 8.1(a). On or before April 13, 2006 the Salaried Plan provided that the Ford Stock Fund shall be invested primarily in shares of Company Stock. and that 2004 Salaried Plan 8.1(a). For each participant who elects... to have contributions invested in the Ford Stock Fund..., the Trustee shall invest the sums so to be invested... in accordance with instructions of a person, company, corporation or other organization appointed by the Company. 31. For the years 1999 to 2001, the Company made matching contributions to the Salaried Plan at the rate of $.60 for each dollar of contributions up to 10% of participants base salaries. Ford Motor Co. Savings Investment Plan for Salaried Employees, Annual Report (Form 11-K) (Dec. 30, 2002) at 4 ( 2002 Salaried Plan 11-K ). All Company matching contributions were invested in the Ford Stock Fund. Id. 32. Matching contributions were suspended between January 3, 2002 and July 1, The match was reinstated effective July 1, 2004 at a rate of $.60 for each dollar contributed up to 5% of participants base salary, then suspended again effective July 1, Salaried Plan 11-K at Participants hired before 2003 were not vested in their matching contributions until five years after their date of hire. Participants hired after 2002 were not vested in their matching contributions until three years post-hire. Ford Motor Co. Savings and Stock Investment Plan for Salaried Employees, Annual Report (Form 11-K) (Dec. 30, 2000) at 5 ( 2000 Salaried 13

20 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 20 of 104 Plan ); Ford Motor Co. Savings and Stock Investment Plan for Salaried Employees, Annual Report (Form 11-K) (Dec. 30, 2001) at 5 ( 2001 Salaried Plan 11-K ); 2002 Salaried Plan 11-K at Matching contributions were invested in the Ford Stock Fund. Ford Motor Co. Savings and Stock Investment Plan for Salaried Employees, Annual Report (Form 11-K) (Dec. 30, 2004) at 4 ( 2004 Salaried Plan 11-K ). During the majority of the Class Period, participants were prohibited from transferring the portions of their Salaried Plan account attributable to matching contributions to other Salaried Plan investment alternatives, except under limited circumstances, such as death or retirement. On July 1, 2004, when Ford announced that it would reinstate the matching contribution, the prohibition was removed. Id. 35. During the Class Period, the Ford Stock Fund represented as much as 50 percent of the Salaried Plan s net assets, as illustrated below: Plan FY Ending Net Assets of Plan Ford Stock Fund Value Percentage of Plan Assets in Ford Stock Fund 1999 (1) $15,070,673,854 $7,969,359,481 53% 2000 (1) $12,751,859,917 $6,314,479,062 50% 2001 (1) $10,356,023,170 $4,255,294,787 41% 2002 (1) $7,664,285,720 $2,605,135,581 34% 2003 (1) $10,088,634,513 $4,196,043,580 42% 2004 (2) $9,998,273,399 $3,734,529,583 37% 2005 (2) $8,199,344,683 $1,692,423,809 21% (1) Year ending Dec. 30 (2) Year ending Dec. 31 Ford Motor Co. Savings Investment Plan for Salaried Employees, Annual Report (Form 11-K) (Dec. 30, 1999) ( 1999 Salaried Plan 11-K ) at 2, 8; 2000 Salaried Plan 11-K at 2, 7; 2001 Salaried Plan 11-K at 2, 8; 2002 Salaried Plan 11-K at 2, 7; Ford Motor Co. Savings and Stock In- 14

21 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 21 of 104 vestment Plan for Salaried Employees, Annual Report (Form 11-K) (Dec. 30, 2003) at 2, 8 ( 2003 Salaried Plan 11-K ); 2004 Salaried Plan 11-K at 3, 9; 2005 Salaried Plan 11-K at 2, 11. B. The Hourly Plan 36. The Hourly Plan was established effective January 1, 1985 to encourage and facilitate systematic savings and investment by eligible hourly employees of the Company and to provide them with an opportunity to become stockholders of the Company. Ford Motor Co. Tax Efficient Savings Plan for Hourly Employees, Annual Report (Form 11-K) (Dec. 30, 2004) at 4 ( 2004 Hourly Plan 11-K ). 37. Hourly employees are eligible to participate in the plan three months after their original date of hire Hourly Plan II. Certain other employees are also eligible to participate in the plan. Id. Participation in the plan is voluntary. Id. III. 38. Participants contributions vest immediately. Id. VI. 39. Participants can elect to contribute up to 50 percent of their eligible pre-tax compensation on a pre-tax and/or after-tax basis Hourly Plan 11-K at One of the investment options available to participants is the Ford Stock Fund, investments in which shall be made primarily in Company Stock Hourly Plan XIII.1(a). This was subsequently modified to provide that investments shall be made exclusively in shares of Company stock. Apr. 6, 2006 Amend., Attach. A XIII(1)(b). 41. Throughout the majority of the Class Period, participants could not withdraw their contributions until the termination of their employment or until they reached 59½ years of age. 5 At the beginning of the Class Period, the percentage was 25 percent. In 2002, this amount was increased to 40 percent and further increased to 50 percent effective April 1,

22 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 22 of With the exception of the purported ESOP option, Hourly Plan participants can invest their account in any of several investment fund options selected and maintained by the plan s fiduciaries in the Trust. Participants can elect to transfer all or any portion of their account balances among the various investment options. One of the investment options is the Ford Stock Fund. 43. During the Class Period, the Ford Stock Fund represented as much as 50% of the Hourly Plan s net assets, as illustrated below: Plan FY Ending Net Assets of Plan Ford Stock Fund Value Percentage of Plan Assets in Ford Stock Fund 1999 (1) $4,740,930,288 $2,520,898,764 53% 2000 (1) $4,310,374,883 $2,162,911,043 50% 2001 (1) $3,773,219,860 $1,591,810,482 42% 2002 (1) $3,139,783,291 $1,132,679,500 36% 2003 (1) $4,446,787,767 $2,064,345,811 46% 2004 (2) $4,590,450,865 $1,909,481,572 42% 2005 (2) $3,917,449,506 $964,425,255 25% (1) Year ending Dec. 30 (2) Year ending Dec. 31 Ford Motor Company Tax-Efficient Savings Plan For Hourly Employees, Annual Report (Form 11-K) (Dec. 30, 1999) at 2, 8; Ford Motor Company Tax-Efficient Savings Plan For Hourly Employees, Annual Report (Form 11-K) (Dec. 30, 2000) at 2, 7; Ford Motor Company Tax- Efficient Savings Plan For Hourly Employees, Annual Report (Form 11-K) (Dec. 30, 2001) at 2, 8; Ford Motor Company Tax-Efficient Savings Plan For Hourly Employees, Annual Report (Form 11-K) (Dec. 30, 2003) at 2, 8; Ford Motor Company Tax-Efficient Savings Plan For Hourly Employees, Annual Report (Form 11-K) (Dec. 31, 2005) at 2,

23 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 23 of 104 VI. DEFENDANTS FIDUCIARY STATUS A. The Nature of Fiduciary Status under ERISA 44. Named Fiduciaries. Every ERISA plan must have one or more named fiduciaries. ERISA 402(a)(1), 29 U.S.C. 1102(a)(1). The person named as the administrator in the plan instrument is automatically a named fiduciary, and in the absence of such a designation, the sponsor is the administrator. ERISA 3(16)(A), 29 U.S.C. 1002(16)(A). 45. De Facto Fiduciaries. ERISA treats as fiduciaries not only persons explicitly named as fiduciaries under 402(a)(1), 29 U.S.C. 1102(a)(1), but also any other persons who in fact perform fiduciary functions. Thus a person is a fiduciary to the extent (i) he exercises any discretionary authority or discretionary control respecting management of such plan or exercises any authority or control respecting management or disposition of its assets, (ii) he renders investment advice for a fee or other compensation, direct or indirect, with respect to any moneys or other property of such plan, or has any authority or responsibility to do so, or (iii) he has any discretionary authority or discretionary responsibility in the administration of such plan. ERISA 3(21)(A)(i), 29 U.S.C. 1002(21)(A)(i). 46. Each of the Defendants was a fiduciary with respect to one or both of the Plans and owed fiduciary duties to one or both of the Plans and the participants under ERISA in the manner and to the extent set forth in the Plans documents, through their conduct, and under ERISA. 47. As fiduciaries, Defendants were required by ERISA 404(a)(1), 29 U.S.C. 1104(a)(1), to manage and administer the Plans, and the Plans investments solely in the interest of the Plans participants and beneficiaries and with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar 17

24 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 24 of 104 with such matters would use in the conduct of an enterprise of a like character and with like aims. 48. Plaintiffs do not allege that each Defendant was a fiduciary with respect to all aspects of the Plans management and administration. Rather, as set forth below, Defendants were fiduciaries to the extent of the specific fiduciary discretion and authority assigned to or exercised by each of them, and, as further set forth below, the claims against each Defendant are based on such specific discretion and authority. 49. Instead of delegating all fiduciary responsibility for the Plans to external service providers, Ford chose to assign the appointment and removal of fiduciaries to itself and the other monitoring Defendants named herein, specifically the VP Defendants. These persons and entities in turn selected Ford employees, officers and agents to perform most fiduciary functions. Although the Plans had an institutional trustee unrelated to Ford, the Trust Agreements required and require the trustee to take directions from Ford personnel. 50. ERISA permits fiduciary functions to be delegated to insiders without an automatic violation of the rules against prohibited transactions, ERISA 408(c)(3), 29 U.S.C. 1108(c)(3), but insider fiduciaries, like external fiduciaries, must act solely in the interest of participants and beneficiaries, not in the interest of the Plan sponsor. B. The Company 51. Ford is the named fiduciary under both Plans, and Ford is also responsible for administering the Plans. Specifically, Ford is charged with authority to control and manage the operation and administration of the Plan Salaried Plan 11.1; 2003 Hourly Plan XX; see also 1997 Trust Agmt. 1(a) ( Administrator shall mean, with respect to the [Plans], the Ford Motor Company ); 2005 Trust Agmt. 1(a) ( Administrator shall mean Ford.... ). 18

25 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 25 of Furthermore, the Company is responsible for selecting the investment alternatives offered by the Plans, including the Ford Stock Fund, and, thus, exercises fiduciary discretion and authority in this regard: The Company shall direct the Master Trustee as to what investment options: (i) the Master Trust shall be invested during the Participant Recordkeeping Reconciliation period, and (ii) the investment options in which Participants may invest in following such period, subject to this Section 4. The Company may determine to offer as investment options: (i) Fidelity Mutual funds, (ii) Outside Mutual Funds, (iii) Separately Managed Portfolios, (iv) Ford Stock Fund.... The investment options selected by the Company are identified on Schedule A attached hereto and in the Summary Plan Description provided to plan participants. The Company may add, delete or substitute additional investment options upon mutual amendment of this Master Trust Agreement and the Schedules to reflect such additions Trust Agmt. 4(b) (emphasis added); The Master Trustee shall have no responsibility for the selection of investment options under the Master Trust.... Ford may determine to offer as investment options only: (i) Mutual Funds, (ii) Ford Stock, (iii) investment contracts chosen by the Master Trustee, (iv) Commingled Pools, (v) portfolios of assets managed by a third party... and (vi) Strategy Funds Trust Agmt. 5(b) (emphasis added). 53. The Company has the corresponding fiduciary obligation, with respect to both Plans, to continually monitor the suitability under the fiduciary duty rules of section 404(a)(l) of ERISA (as modified by section 404(a)(2) of ERISA) of acquiring and holding Ford Stock) Trust Agmt. 4(b)(3) (emphasis added); see also 2005 Trust Agmt. 5(d)(ii) (providing virtually identical language). 54. Moreover, Ford, at all applicable times, has exercised control over the activities of its officers and employees that performed fiduciary functions with respect to the Plans, including 19

26 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 26 of 104 the VP Defendants, the Executive Officer Defendants, the IPC Defendants and the IPOC Defendants, and can hire or appoint, terminate, and replace such employees at will. Ford is, thus, responsible for the activities of its officers and employees through traditional principles of agency and respondeat superior liability. 55. Ford, as a corporate entity, cannot act on its own without any human counterpart. In this regard, during the Class Period, Ford relied and continues to rely directly on the individual Defendants named herein to carry out its fiduciary responsibilities under the Plans and ERISA The Company s Fiduciary Status under the Salaried Plan 56. In addition to the general fiduciaries responsibilities described above, the Company is also charged with the appointment, monitoring and removal of the Trustee and execution and amendment of the Trust documents as follows: 2006 Salaried Plan 9.1. Appointment of Trustee. The Company, by action of its Group Vice President, Corporate Human Resources, Vice President Finance and Treasurer and Vice President General Counsel shall appoint one or more individuals or corporations to act as Trustee under the Plan, and at any time may remove the Trustee and appoint a successor Trustee. The Company may, without reference to or action by any Employee, Participant or beneficiary or any other Participating Employer, enter into such Trust Agreement with the Trustee or other parties, make such amendments to such Trust Agreement or further agreements and take such other steps and execute such other instruments as the Company in its sole discretion may deem necessary or desirable to carry the Plan into effect or to facilitate its administration. 6 Ford s Board of Directors and its members are not presently named as Defendants. Should Plaintiffs discover, through further investigation, including formal discovery, that the directors should be named as Defendants because they exercised fiduciary responsibilities on behalf of Ford or other Plan fiduciaries, Plaintiffs will, to the extent necessary and appropriate, amend or seek leave to amend his Complaint. 20

27 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 27 of The Company, through the VP Defendants, has the authority to appoint and remove... investment managers under the Plan, to approve policies relating to the allocation of contributions and the distribution of assets among Trustees and investment managers, to approve Plan amendments and to modify the Plan or suspend the operation of any provisions of the Plan. Id. 11.2(a). 58. The Company, through the VP Defendants, was required to establish and did establish an Administration Committee to carry out fiduciary duties with respect to the Salaried Plan. Id. 11.3(a). The Company had responsibility to appoint, and hence to monitor, and to remove, the members of the Administration Committee. Id. 11.2(c). 59. The Company, through the VP Defendants, was required to establish and did establish the Salaried Plan s IPC to carry out fiduciary duties with respect to the Salaried Plan, as described in VI. E.1 below Salaried Plan The Company had responsibility to appoint, and hence to monitor, and to remove, the members of the Salaried Plan s IPC. 60. As explained in more detail below, the Salaried Plan s IPC is responsible for recommending investment process guidelines to the Company and VP Defendants, reviewing the guidelines, recommending changes, reviewing investment option performance, and making recommendations to the VP Defendants regarding the addition, deletion, replacement and overall line-up of investment options offered by the Salaried Plan. The Company is responsible for evaluating and approving the investment guidelines prepared by the Salaried Plan s IPC, as well as any changes to the plan s investments and investment offerings. 61. Purportedly effective May 11, 2005, the Company, by and through the Board of Directors, established the Salaried Plan s IPOC with specific responsibilities for the management 21

28 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 28 of 104 of the Salaried Plan s investments, including Ford stock in the Salaried Plan. The Company is responsible for monitoring the performance of the Salaried Plan s IPOC. 2. The Company s Fiduciary Status under the Hourly Plan 62. The Company s fiduciary duties and responsibilities for the Hourly Plan are substantially the same as those for the Salaried Plan. 63. The Hourly Plan likewise charges the Company with appointment, monitoring and removal of the Trustee and execution and amendment of the Trust documents Hourly Plan XVI. 64. Similarly, under the Hourly Plan, the Company, through the VP Defendants, has the authority to approve policies relating to the allocation of contributions and the distribution of assets among trustees, and to approve all Plan amendments and modifications that were not otherwise reserved to the Board of Directors. Id. XX. 65. The Company, through the VP Defendants, was required to establish and did establish an Administration Committee (referred to in the Hourly Plan merely as the Committee, but upon information and belief, identical in membership and operation to the Salaried Plan s Administrative Committee) to carry out fiduciary duties with respect to the Hourly Plan. Id. The Company had responsibility to appoint, and hence to monitor, and to remove, the members of the Administration Committee. 66. The Company, through the VP Defendants, was required to establish and did establish the Hourly Plan s IPC to carry out fiduciary duties with respect to the Hourly Plan, as described in VI. E.2 below. Id. The Company had responsibility to appoint, and hence to monitor, and to remove, the members of the Hourly Plan s IPC. 22

29 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 29 of As explained in more detail below, the Hourly Plan s IPC is responsible for recommending investment process guidelines to the Company and VP Defendants, reviewing the guidelines, recommending changes, reviewing investment option performance, and making recommendations to the VP Defendants regarding the addition, deletion, replacement and overall line-up of investment options offered by the Hourly Plan. The Company is responsible for evaluating and approving the investment guidelines prepared by the Hourly Plan s IPC, as well as any changes to the plan s investments and investment offerings. 68. As with the Salaried Plan, the Company established an IPOC for the Hourly Plan, purportedly effective May 11, 2005, and charged it with specific responsibilities with respect to the management and administration of the Hourly Plan assets, including Ford stock. 69. Consequently, in light of the foregoing duties, responsibilities, and actions, Ford was a named fiduciary of the Plans pursuant to ERISA 402(a)(1), 29 U.S.C. 1102(a)(1), and a de facto fiduciary of both the Salaried Plan and Hourly Plan within the meaning of ERISA 3(21), 29 U.S.C. 1002(21), during the Class Period in that it exercised discretionary authority or discretionary control respecting management of the Plans, exercised authority or control respecting management or disposition of the Plans assets, and/or had discretionary authority or discretionary responsibility in the administration of the Plans. C. The Executive Officer Defendants 70. Pursuant to the Salaried Plan, the Chief Operating Officer, Chief of Staff, or the Vice Chairman shall individually have the authority to determine the amount of the Company Matching Contributions up to a preset limit set forth in the plan, and have the authority to suspend or restore such Company Matching Contributions, wholly or partly, effective at such time and in such amount as such officer determines in such officer s sole discretion Salaried 23

30 Case 4:06-cv PVG-SDP Document 70 Filed 04/30/2007 Page 30 of 104 Plan 11.2(a). Because matching contributions were invested in Ford stock and the Executive Officer Defendants were responsible for determining whether to make matching contributions and, when made, the amount of them, the Executive Officer Defendants participated in fiduciary decision-making regarding the investment of Plan assets. 71. Consequently, in light of the foregoing duties, responsibilities, and actions, the Executive Officer Defendants are fiduciaries of the Salaried Plan within the meaning of ERISA 3(21), 29 U.S.C. 1002(21), during the Class Period in that they exercised discretionary authority or discretionary control respecting management of the Salaried Plan, exercised authority or control respecting management or disposition of the Salaried Plan s assets, and/or had discretionary authority or discretionary responsibility in the administration of the Salaried Plan. D. The VP Defendants 1. The VP Defendants Fiduciary Status under the Salaried Plan 72. Pursuant to the Salaried Plan, the VP Defendants are responsible for appointing, renewing, and removing trustees and investment advisors, approving policies relating to the allocation of contributions and the distribution of assets among trustees and investment advisors, approving Plan amendments not related to matching contributions, modification of the Plan, and suspension of the operation of any provisions of the Plan Salaried Plan 11.2(a) & (b), Furthermore, the VP Treasurer and the Senior VP General Counsel are fiduciaries of the Salaried Plan to the extent that they: shall each be authorized on behalf of the Company (a) to give directions to Trustees and investment managers required or permitted under Trust Agreements, investment manager agreements,... and agreements ancillary thereto, and (b) to designate in writing persons to act on behalf of the Company under and in connection with the Trust Agreements, investment 24