Among recent actions by the Department of Labor were a suit to recover money for an employee benefits plan; a suit to appoint an independent fiduciary for a company’s 401(k) plan assets; winning a consent judgment to restore $95,000 to a 401(k) plan; and a successful lawsuit against City National Corporation, which was found to be guilty of self-dealing.
The Leiter Group
The DOL filed suit to recover more than $110,000 after an investigation by the Employee Benefits Security Administration in Kansas City, Missouri, found Peoria, Illinois-based law firm The Leiter Group Attorneys and Counselors Professional Corporation and Thomas E. Leiter, the firm’s president and sole owner, violated multiple provisions of the Employee Retirement Income Security Act.
The suit said Leiter caused the company’s retirement plan to loan more than $179,000 to building trusts controlled by Leiter, and that he also caused the plan to invest $225,000 in a Florida condominium project substantially controlled by him.
In its suit, the DOL is seeking a court order to require The Leiter Group Attorneys and Counselors Professional Corporation and Leiter to restore all losses to the plan’s participants, as well as the appointment of an independent fiduciary to administer the plan.
As of December 31, 2014, the plan had 10 participants and $435,767 in assets.
Interactive Marketing Group
Another EBSA investigation, this time in New Jersey, found that Interactive Marketing Group failed to formally terminate a 401(k) profit-sharing, the Interactive Marketing Group Inc. 401(k) Profit-Sharing Plan, after the company ceased all business operations in or before December 2014. The company established the plan in 1987, and as of May 26, 2015, it had a total of $753,310 in assets, currently held by State Street Bank and Trust Co., in Quincy, Massachusetts.
The DOL has filed suit seeking the appointment of an independent fiduciary to administer the plan, distribute its assets to all affected participants and terminate the plan.
Brunk Industries Inc.
An EBSA investigation also resulted in a lawsuit against Brunk Industries Inc., James Brunk, and the Contractors and Employees 401(k) Plan, charging that James Brunk and Brunk Industries Inc. failed to collect prevailing wage employer contributions for the employees’ 401(k) plan. These contributions were provided by government contracts for work performed by the defendants’ employees under prevailing wage laws.
Instead, the DOL said, the defendants retained and comingled the contributions with company assets and used the funds for non-plan purposes. The court agreed, and its consent order requires the defendants to restore $95,109 to the 401(k) plan. The judgment also removes Brunk as the plan’s fiduciary and appoints Lefoldt & Company as the independent fiduciary responsible for winding up the plan, including the distribution of its assets to participants.
Brunk shall pay $4,890 of the costs for this independent fiduciary, and also may be assessed a 20 percent civil penalty on the amount restored to the plan. The court order also permanently enjoins Brunk from serving as a fiduciary of, or service provider to, any ERISA-covered employee benefit plan in the future.
City National Corporation
Last but far from least, in Los Angeles, U.S. District Court Senior Judge Terry J. Hatter, Jr. found that City National Corporation and its subsidiaries, owned by the Royal Bank of Canada, violated the Employee Retirement Income Security Act by self-dealing for a period of years.
An EBSA investigation found that a committee consisting entirely of high-ranking, salaried employees approved the plan’s high fees. In internal meeting minutes and emails, City National employees acknowledged that the plan’s fees were high, but never took any corrective action to refund money owed to the plan and its participants.
In 2015, the DOL sued City National after the company repeatedly refused to voluntarily correct its ERISA violations and return money owed to the plan. The department moved for summary judgment in February, and the court agreed.
The company has been ordered to retain an independent, third-party fiduciary to assist in accounting for all compensation it received from the plan, in the form of mutual fund revenue from 2006 through 2012, as well as lost opportunity costs, to correct its numerous ERISA violations. The department estimates this amount to exceed $6 million.