The U.S. Department of Labor filed a lawsuit against a San Francisco bank and its directors alleging their mismanagement of the bank’s Employee Stock Ownership Plan assets resulted in a $1.4 million loss.
The suit asks California Pacific Bank and its four plan fiduciaries be forced to pay back all the losses they incurred.
After terminating the ESOP in 2010, the fiduciaries violated the Employee Retirement Income Security Act by failing to liquidate and distribute plan assets in cash to plan participants as required, the DOL alleges. Because the bank isn’t publicly traded, this left participants with shares of the company’s stock they could not easily liquidate for cash, if at all.
Agency investigators determined participants would have received about $1.24 million if the plan’s 97,237 shares had been liquidated and distributed at their assessed December 2009 value. The lawsuit also alleges that in 2011, $81,407 was improperly diverted to the bank, and in 2012, the fiduciaries improperly transferred nearly $70,000 in plan assets to the bank.
It also alleges the bank held plan assets in non-interest-bearing accounts, making assets available for bank use without charge and without accruing interest on the funds for the benefit of the plan.
The complaint names California Pacific Bank CEO and board member Richard Chi, who served as the plan administrator and a plan trustee. Also named are board members and trustees Akila Chen, Kent Chen, and William Mo.
The suit asks the court to permanently remove all four as plan fiduciaries and to appoint an independent fiduciary with control over the plan and its assets. The independent fiduciary would administer the plan liquidation and termination.
It also asks the defendants be banned from acting as fiduciaries to ERISA retirement plans and they give back any financial benefits they received as a result of their violations.