For Immediate Release: February 9, 2012
Contact: Joanna Hawkins or Leni Fortson
Release Number: 12-114-PHI (ebsa 12-018)
US Labor Department sues Bethesda, Md., company and owner to restore
nearly $800,000 in 401(k) plan funds invested in fraud scheme
BETHESDA, Md. ‒ The U.S. Department of Labor has filed a lawsuit against Bethesda-based Dynasty Construction Inc. and owner John J. Barrett III for breach of fiduciary duty with respect to the company’s 401(k) plan. According to the suit, more than $775,000 from the 401(k) plan was invested in a fraudulent scheme in 2006, in violation of the Employee Retirement Income Security Act. This amount represented nearly all of the assets in the accounts of the 19 plan participants as of the end of 2005.
The suit resulted from an investigation by the department’s Employee Benefits Security Administration and was filed in the U.S. District Court for the District of Maryland. It alleges that the defendants failed to adequately or prudently research the credentials of the financial representative they retained, and failed to adequately or prudently research or analyze the investment of plan assets in the Transcontinental Airlines Employee Investment Savings Account, a fraudulent scheme orchestrated by Louis Pearlman, who is serving 25 years in federal prison.
“These acts have jeopardized the retirement security of former Dynasty employees by those charged with the responsibility of protecting workers’ benefits,” said Phyllis C. Borzi, assistant secretary of labor for employee benefits security. “The Labor Department will not stand for it, and we will take all actions necessary to make sure workers receive their hard-earned benefits.”
The suit seeks to restore to the plan all losses, including interest and lost opportunity costs. It also would require the defendants to provide all books, documents and records relating to the finances and administration of the plan, as well as remove the defendants as fiduciaries of the plan and any other employee benefit plan for which they act as fiduciaries. The defendants would be permanently enjoined from acting directly or indirectly in any fiduciary capacity with respect to any employee benefit plan, and permanently enjoined from exercising any custody, control or decision-making authority with respect to the assets of any employee benefit plan covered by ERISA. Finally, the suit seeks the appointment of an independent fiduciary to manage and administer the plan.
Dynasty Construction Inc. ceased operations in 2007.
The investigation was conducted by EBSA’s Washington District Office in Silver Spring, Md., and the suit was filed by the department’s regional solicitor in Philadelphia. Employers and workers can contact EBSA’s Washington office at 202-693-8700 or toll-free at 866-444-3272 for help with problems relating to private sector pension and health plans. Additional information can be found at www.dol.gov/ebsa
Solis v. Dynasty Construction Inc. et al.
Civil Action Number: 8:12-cv-00249-DKC
U.S. Department of Labor news materials are accessible at www.dol.gov. The information above is available in large print, Braille, audio tape or disc from the COAST office upon request by calling 202-693-7828 or TTY 202-693-7755.