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2016 ERISA Litigation and Significant Issues in Litigation

LABOR DEPARTMENT PARTICIPATION IN ERISA LITIGATION
AND SIGNIFICANT ISSUES IN LITIGATION

Compiled by the Plan Benefits Security Division
Office of the Solicitor

CALENDAR YEAR 2016

TABLE OF CONTENTS

  1.    Employer Stock
  2.    Financing the Employer

  1.    Collection of Plan Contributions and Loan Repayments
  2.    Insurance Rebates
  3.    Miscellaneous

  1.    Financing the Union
  2.    Prudence of Investments
  3.    Preemption
  4.    Participants' Rights and Remedies
  5.    Section 510
  6.    Participant Loans
  7.    MEWAs
  8.    Financial Institution and Service Provider Cases
  9.    Orphan Plans
  10.    Contempt and Subpoena Enforcement
  11.    Bankruptcy
  12.    Miscellaneous

TABLE OF CASES

Allen v. Greatbanc (7th Cir.)

Anstett, Perez v. (D.N.D.)

Astro Communications 401(k) Plan, Perez v. (S.D.N.Y.)

Atilano Cordero Badillo and the Empresas A. Cordero Badillo Retirement Plan, Perez v. (W.D. Pa.)

Authorized Factory Service, Inc., Perez v. (W.D. Pa.)

Aware Environmental Inc., Perez v. (W.D.N.C.)

Bankers Trust Company, Perez v. (D. Utah)

BAT Masonry, Perez v. (W.D. Va.)

Belanger, Perez v. (E.D. Pa.)

Black, Perez v. (Bankr. D. Conn.)

Bond v. Marriott Internat'l (4th Cir.)

Bonner, Perez v. (D. Minn.)

Bowman, Perez v. (Bankr. D.N.J.)

Bridgeport Health Care Center, Inc. and Chaim Stern, Perez v. (D. Conn.)

Bruister, Perez v. (S.D. Miss. and 5th Cir.)

Brunk, Perez v. (E.D. Cal.)

Business Administrators Consultants, Inc., Perez v. (S.D. Ohio)

Byrnes, Perez v. (N.D.N.Y.)

Cactus Feeders, Inc., Perez v.

California Pacific Bank, Perez v. (N.D. Cal. and 9th Cir.)

Carolina Crawler & Equipment of Charleston Inc., Perez v. (D.S.C.)

Carolina Steel & Stone Inc., Perez v. (W.D.N.C)

Carr Freight, Perez v. (D. Minn.)

Chainani, Perez v. (S.D. Tex.)

Chimes District of Columbia, Inc., Perez v. (D. Md.)

City National Corporation, Perez v. (C.D. Cal.)

Claxton, Perez v. (E.D. Mo.)

Coffman, Perez v. (W.D. Okla.)

Coffman, Perez v. (E.D. Wis.)

Commodity Control Corp., Perez v.

Community Care, Inc. 403(b) Retirement Plan, Perez v. (S.D. Iowa)

Couturier, Solis v.

Cullen, Perez v. (D. Del.)

DeLaGarza, Secretary v. (E.D. Mich.)

Demmy, Perez v. (S.D. Ohio)

Distribution by Datagen Inc. f/k/a Depawix Health Resources Inc., Perez v. (N.D. Ga.)

Ditch Witch Equipment of Tennessee Inc., Perez v. (E.D. Tenn.)

Doyle, Perez v. (D.N.J. and 3d Cir.)

Draeger Construction, Perez v. (N.D. Cal.)

DSI Contracting Inc. and Burgess Baird Jr., Perez v. (N.D. Ga.)

Encorium Group, Inc., Perez v. (E.D. Pa.)

Ethos Healthcare, Inc. 401(k) Plan, Perez v. (W.D. Tex.)

Eye Centers of Tennessee LLC, Perez v. (M.D. Tenn.)

FCJ, LLC, Perez v. (D. Mass.)

First Bankers Trust Services, Inc., Perez v. (S.D.N.Y.)

First Bankers Trust Services, Inc., Perez v. (D. Vt.)

First Bankers Trust Services, Inc. and Frank Firor, Perez v. (S.D.N.Y.)

First Bankers Trust Services, Inc. and Vincent DiPano, Perez v. (D.N.J.)

First Farmers Financial Litigation, In re (N.D. Ill.)

Fletcher v. Convergex (2d Cir.)

Fletcher-Thompson and Michael S. Marcinek, Perez v. (D. Conn.)

Forms Plus Inc., Harris v. (N.D. Ala.)

Futhey, Perez v. (W.D. Tenn.)

Geary Construction Inc., Perez v. (D. Utah)

George W. Mathias, In re (7th Cir.)

Ginsberg, Perez v. (S.D.N.Y.)

Global Research Services, LLC, Secretary v.

Gobeille v, Liberty Mut. Ins. Co. (2d Cir. and S. Ct.)

Greater Columbia OB-GYN P.A., Perez v. (D.S.C.)

Gruber Systems, Inc., Perez v. (C.D. Cal.)

H.C. Watson Corp. d/b/a Interim Healthcare, Perez v. (D. Mass.)

Hanco, Inc., Perez v. (N.D. Ind.)

Harris, Solis v.; Harris, Perez v. (In re Harris) (D. Minn. and Bankr. D. Minn.)

Harris, Perez v. (8th Cir. BAP)

Hayes, Perez v. (N.D. Ohio and Bankr. N.D. Ohio)

Hicks, Perez v. (D. Md.)

Hitchcock v. Cumberland University (6th Cir.)

Hobbs, Upchurch and Associates, P.A., Perez v. (M.D.N.C.)

Homestead Physicians, Inc., Perez v. (S.D. Fla.)

Horizon NR, LLC, Perez v. (E.D. Ky.)

Hutcheson, Solis v. (D. Idaho)

Interactive Marketing Group 401(k) Plan, Perez v. (D.N.J.)

Island Organics Profit Sharing Plan, Perez v. (D.N.J.)

Invesco Trust Company, Perez v. (unfiled)

Iron Workers District Council of N.E. Pension Fund

Joyce Klindt, MD Plan f/b/o Joan Davis, Perez v. (E.D.N.Y.)

Kaminski, Perez v. (N.D. Ill.)

Kann, Perez v. (D. Md.)


Keever, Secretary v. (N.D. Tex.)

Kelley v. Fidelity (1st Cir.)

Kennedy Fuel Co., Perez v. (D. Or.)

Kesco Southeast Inc., Perez v. (N.D. Ga.)

Kevin Brown, United States of America v. (D. Mass.)

Kimberly P. Hood, M.D., Perez v. (N.D. Fla.)

Kineticsware, Inc., Solis v.; Sampson, Solis v. (In re Sampson) (W.D. Wash. and Bankr. W.D. Wash.)

Kinser, Perez v. (W.D. Va.)

Koresko, Secretary v. (3d Cir.)

Kwasny, Perez v. (E.D. Pa.)

Lapensohn, Perez v. (E.D. Pa. and Bank. E.D. Pa.)

Laurens, Perez v. (N.D. Ill.)

Law Partners LLC, Perez v. (N.D. Ala.)

Leiter, Perez v. (C.D. Ill.)

Lewis, Perez v. (N.D. Ill. and Bankr. N.D. Ill.)

Lily Pond Nursing Home Savings Plan, Perez v. (E.D.N.Y.)

Lorna Clause, In re (8th Cir.)

MagnaCare Administrative Services, LLC., Perez v. (S.D.N.Y.)

Mashali, Perez v. (D. Mass. and Bankr. D. Mass.)

Massey Wholesale Co. Inc., Perez v. (S.D. Ga.)

McCaffree v. Principal Life Ins. Co. (8th Cir.)

McCulloch v. United Healthcare (2d Cir.)

Michelson, Perez v. (W.D. Tex.)

Mirabile, Perez v. (D. Kan.)

Monaco, Perez v. (N.D. Ill.)

Montanile v. Bd. of Trustees of the Nat'l Elevator Indus. Health Benefits Plan (S. Ct.)

Mueller, Perez v. (D. Minn.)

Mueller, Perez v. (E.D. Wis.)

N.C. Caro, M.D., Solis v. (N.D. Ill. and Bankr. N.D. Ill.)

Olson, Perez v. (D. Minn.)

Osberg v. Foot Locker (2d Cir.)

Page, Perez v. (D. Mass.)

PBI Bank, Inc., Perez v. (S.D. Ind.)

Philadelphia Committee for the Prevention of Blindness, Perez v. (E.D. Pa.)

Potts, Perez v. (S.D. Ohio)

Quality Control Pattern & Model, Inc., Perez v. (E.D. Pa.)

Ramsay, Perez v. (W.D.N.Y.)

Results One, Solis v. (N.D. Ill. and 7th Cir.)

Robert Plan Corp., In re (Bankr. E.D.N.Y.)

Roach, Jr., Perez v. (D.D.C.)

Rose, Perez v. (E.D. Mich. and Bankr. E.D. Mich.)

Salinas, Perez v. (W.D. Tex.)

Sanchez, Perez v. (N.D. Ga.)

Schrepfer, Perez v. (D. Colo.)

Scott Brain, Perez v. (C.D. Cal. and 9th Cir.)

Seaboard Management, LLC, Perez v. (D. Md.)

Sergio J. Cabrera, M.D. Perez v. (N.D. Fla.)

Severstal Wheeling, Inc. Retirement Committee, Perez v. (W.D. Pa.)

Severstal Wheeling, Inc. Retirement Committee v. WPN Corp. (2d Cir.)

Sherrod, Perez v. (N.D. Ill.)

Sierra Pacific Health Benefits Plan (unfiled)

Silva, Perez v. (D. Md.)

Sims, Perez v. (M.D. La.)

Slocum, Perez v. (Bankr. M.D. Pa.)

Smith, Perez v. (W.D. Pa. and Bankr. N.D. W. Va.)

Smith v. Aegeon (6th Cir.)

Solnin v. Sun Life (2d Cir.)

Sommet Group, Harris v. (M.D. Tenn.)

Southwest Regional Council of Carpenters v. McCarron (C.D. Cal.)

Spartan Roofing Company, Inc., Perez v. (W.D. Mich.)

State Street Bank and Trust Company Foreign Exchange Case Settlement (unfiled)

Steven Keares, Inc., Perez v. (E.D. Pa.)

Sulit, Perez v. (N.D. Ill.)

TapanAM Associates and Tapan Banerjee, Perez v. (W.D. Mo.)

Tapscott, Perez v. (D. Colo.)

Tarry Bratton, BC, Inc., Perez v. (M.D. Pa.)

Tatum v. RJ Reynolds (4th Cir. and S. Ct.)

The Children's Place Inc., Perez v. (M.D. Fla.)

The Scanlan Agency, Perez v. (E.D. Pa.)

Thole v. U.S. Bank (8th Cir.)

Tomco Auto Parts, Inc., Solis v.; Schoenfeld, Solis v. (In re Schoenfeld) (C.D. Cal., Bankr. C.D. Cal., and 9th Cir.)

TPP Holdings Inc., Perez v. (W.D.N.C. and 11th Cir.)

Travelers Insurance Company, Inc. Perez v. (S.D.N.Y.)

Trujillo v. Landmark Media (4th Cir.)

United Associates Lighting Corp., Perez v. (W.D.N.C.)

Validata Computer and Research Corp., Perez v. (M.D. Ala.)

Van Loo v. Church's (6th Cir.)

Vinoskey, Perez v. (W.D. Va.)

Watson, Perez v. (D. Kan.)

Weinhagen, Perez v. (D. Minn.)

Weiss, Perez v. (E.D.N.Y. and 2d Cir.)

Whitely v. BP (5th Cir.)

Wright, Perez v. (D. Minn.)


A. Employer Stock

Allen v. Greatbanc (7th Cir.)

This case involves allegations that the trustee, GreatBanc, overpaid company executives for employer stock. The district court dismissed the case on a motion to dismiss, relying on the Supreme Court's decision in Fifth Third Bancorp v. Dudenhoeffer, which held that a plaintiff must show"special circumstances" to properly plead a claim that a fiduciary should have known, based on publicly available information alone, that publicly traded stock was overpriced at the time of purchase. The court stated that Fifth Third's"special circumstances" requirement"seems applicable in this case" although it involves stock in a privately held company, and it faulted plaintiffs for failing to plead special circumstances. Because plaintiffs' fiduciary duty claim failed, the court reasoned, their prohibited transaction claim must fail. The plaintiffs appealed. The Secretary filed an amicus brief, supporting the plaintiffs, on February 16, 2016. Oral argument, in which the Secretary participated, was held on April 12, 2016. The Secretary argued two points: (1) while taking no position on the adequacy of plaintiff's' fiduciary duty claim, the Secretary urged the Seventh Circuit to clarify that Fifth Third's"special circumstances" requirement applies only to cases involving publicly traded stock; and (2) the Secretary urged that the district court's dismissal of the prohibited transaction claim was erroneous because plaintiffs are not required to negate in their complaints the applicability of the adequate consideration exemption, which is an affirmative defense on which the defendant has the burden of both pleading and proof. On August 25, 2016, the Seventh Circuit issued a favorable decision, calling GreatBanc's and the district court's reliance on Fifth Third unwarranted because the Supreme Court's holding"was limited to publicly traded stock and relies on the integrity of the prices produced by liquid markets." The Seventh Circuit also agreed that a plaintiff need not plead the absence of exemptions to prohibited transactions because the section 408 exemptions are affirmative defenses. Plan Benefits Security Division

Perez v. Bankers Trust Company (D. Utah)

On November 14, 2016, the Secretary filed a complaint against the Bankers Trust Company and the Bankers Trust Company of South Dakota, the fiduciaries of the MonaVie ESOP, alleging that, in November 2010, they participated in a transaction which caused the ESOP to pay more than adequate consideration for the company's shares. Before the complaint was filed, in July 2016, the Secretary, the defendants and private class-action plaintiffs participated in a mediation in which all issues were resolved pre-filing. Shortly after the complaint was filed, the court consolidated the Secretary's case with the private class-action litigation already before him in a related matter. On November 29, 2016, the Secretary filed a consent judgment and order requiring payment of $16 million in restitution to the ESOP and permanently barring Bankers Trust Company from serving as a fiduciary to an ESOP. San Francisco Office

Perez v. BAT Masonry (W.D. Va.)

On August 28, 2015, the Secretary filed a complaint against BAT Masonry Company, Inc. in connection with an employer stock purchase by the company's ESOP. Also named as defendants are trustee and former company owner and officer Wayne Booth, as well as a trust and another company controlled by Wayne Booth, trustees and former officers Gregory Booth and Melvin Hinton, former officer John Rosser, special independent ESOP trustee James Joyner, M.H. Masonry & Associates, the successor to BAT Masonry, and Sheldrick, McGehee & Kohler LLC ("SMK"), which provided valuation services to the ESOP. The complaint alleges that Wayne Booth sold BAT Masonry stock to the BAT ESOP in July 2010 for approximately $13.5 million (consisting of cash and notes), a price exceeding the company's fair market value. The original valuation was excessive because, among other reasons, it was based on a $5.8 million"officer notes receivable" from Wayne Booth held by the company that simply represented funds that he withdrew from the company while he controlled it and that he never intended to repay. The complaint further alleges that in July 2012, Gregory Booth and Hinton abandoned the company and the BAT ESOP. In the months leading up to the closure of BAT, Gregory Booth and Hinton formed MH Masonry as a competitor masonry subcontractor. On September 18, 2015, the Secretary filed an adversary complaint in Wayne Booth's Chapter 7 bankruptcy, alleging that his debts are non-dischargeable. On October 2, 2015, the Secretary filed a motion to withdraw that adversary proceeding from the bankruptcy court to the district court. On November 3, 2015, the district court granted the Secretary's motion and ordered the adversary proceeding withdrawn from the bankruptcy court and consolidated with the district court action. On August 16, 2016, the court entered a consent order against SMK, requiring SMK to disgorge the profits it obtained in issuing its valuation. On October 26, 2016, the court entered a consent order against Rosser, requiring him to pay $36,000 in restitution to the ESOP and entering a five-year fiduciary bar against him. Philadelphia Office

Perez v. Bruister (S.D. Miss. and 5th Cir.)

On April 29, 2010, the Secretary filed a complaint against Herbert Bruister, Jonda Henry, Amy Smith and Michael Bruce, as trustees of the Bruister ESOP, in connection with the purchase of stock in Bruister & Associates, Inc. from Bruister for more than its fair market value. On July 1, 2011, the Secretary amended the complaint to add a kickback claim, alleging that Bruister agreed to pay one of the ESOP's trustees a 5% commission on the value of a stock sale. On December 20, 2013, the district court dismissed claims relating to two transactions, including the kickback claim, finding that ERISA's six year statute of limitations is jurisdictional and cannot be extended by a tolling agreement. The court denied the parties' summary judgment motions in all other respects. A 19-day bench trial was held in August 2014. On October 26, 2014, the court ruled for the Secretary and private plaintiffs and awarded $6.48 million, basing its award on an average of the expert witness' testimony plus interest, rather than the Secretary's proposed remedy of rescission, which would have resulted in recovery of $8.78 million plus interest. The defendants filed a notice of appeal, and the Secretary cross-appealed on the issue of remedy. On January 16, 2015, through an ex parte motion alleging that Bruister intentionally frustrated collection of the judgment and fraudulently conveyed assets, the Secretary obtained a temporary restraining order ("TRO") freezing his assets. Also in January 2015, the Secretary obtained an order directing Bruister to remedy his inadequate responses to post-judgment discovery. The parties by agreement converted the TRO into a preliminary injunction that continues the asset freeze and sets forth procedures for preserving and potentially selling Bruister's main asset. On July 14-16, 2015, the district court held three days of evidentiary hearings on Bruister's motions to stay judgment collection pending the appeal, to relieve him from the asset-freeze preliminary injunction, to claw-back as privileged some documents produced previously, and to disqualify plaintiff's counsel. On October 15, 2015, the district court deferred ruling on these motions except for holding that defendants had waived some claimed privileges by having produced the documents to third parties. The evidentiary hearings included the Secretary's motion to hold Bruister in contempt for non-payment of the judgment, which the court denied without prejudice. On December 1, 2015, the Fifth Circuit heard oral argument on defendants' appeal and the Secretary's cross-appeal of the final judgment. On May 3, 2016, the Fifth Circuit affirmed the district court's decision in nearly all relevant respects and affirmed the $6.48 million judgment against all defendants. On January 4, 2017, the district court ruled on three long pending motions on judgment collection matters, ordering Bruister to: (1) satisfy the judgment by February 18, 2017, (2) give plaintiffs information (such as medical records) necessary to enable plaintiffs to sell a life insurance policy that Bruister previously had transferred to plaintiffs, and (3) by February 18, 2017, turn over to plaintiffs three automobiles that Bruister previously had promised to post as security for his judgment debt. The court also denied without prejudice Bruister's motion to release, from the order freezing his assets, $40,000 in bank accounts and denied without prejudice plaintiffs' motion to release (to plaintiffs) from the court's registry certain asset-sale proceeds. Atlanta Regional Office and Plan Benefits Security Division

Perez v Cactus Feeders, Inc. (N.D. Tex.)

On March 10, 2016, the Secretary filed a complaint against Cactus Feeders, Inc., Lubbock National Bank, the Cactus Feeders board of directors, and ESOP committee members, alleging that Lubbock National Bank, the ESOP trustee, caused the ESOP to pay more than adequate consideration for company stock and that the company, as plan administrator and acting through its board of directors and designated ESOP committee members, had knowledge of the trustee's breach of duty but did nothing to remedy that breach. The ESOP, which already owned 30% of the company stock, purchased the remaining 70% of the company stock for $100 million. The purchase price, however, failed to include sufficient adjustments for warrants and stock options that, when exercised, would dilute the ESOP's equity from 100% to 55%, failed to include any adjustments for lack of marketability as the company remains a private entity, and failed to include any adjustments for an investors' rights agreement that effectively gave the selling shareholders control over the board directors and the company for fifteen years. On December 30, 2016, the court denied the defendants' motion to dismiss. Dallas Office

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Perez v. California Pacific Bank (N.D. Cal. and 9th Cir.)

On August 15, 2013, the Secretary filed a complaint against California Pacific Bank and its CEO and Directors, who were trustees of the Bank's ESOP, in connection with (a) the Bank's failure to cash out ESOP participant accounts when the ESOP was terminated; (b) the improper diversion of ESOP assets to the Bank in connection with a real estate"receivable"; (c) the failure to hold ESOP assets in interest-bearing accounts at the Bank; and (d) a second improper diversion of ESOP assets to the Bank, which the Bank claimed was a return of an over-contribution. The parties filed cross-motions for summary judgment at the end of 2014. On July 20, 2015, the court denied defendants' motion and granted in part and denied in part the Secretary's cross-motion. The court found that the Secretary did not establish that holding plan assets in non-interest-bearing accounts is a violation as a legal matter. The court entered summary judgment in favor of the Secretary on liability for failure to distribute cash to participants and improper diversion of the receivable but left for trial the issue of losses. The other triable issues were whether the cash taken from the plan was justifiable as an employer contribution made as a"mistake of fact" under ERISA section 403(c)(2)(A)(i), and whether the one-year limitation period for return of a mistaken contribution should be tolled. A trial was held in April 2016. On October 24, 2016, the court entered judgment in favor of the Secretary, holding defendants jointly and severally liable for over $866,840 in retirement benefits, plus interest at the IRC rate advocated by the Secretary. The court found that defendants failed to adduce credible and specific evidence that the cash balance left in the plan's account was an over contribution made as"a mistake of fact," that the equities supported an award of prejudgment interest because defendants' conduct was in blatant disregard of the plan document's express terms, and that two participants who had accepted payments that were less than their entitlement under the plan should get their full benefits. On November 7, 2016, all defendants filed a joint notice of appeal from the court's final judgment and all interlocutory orders, including summary judgment. On November 15, 2016, defendants deposited $1,045,593.20 with the district court clerk to secure the judgment, post-judgment interest, and costs. Plan Benefits Security Division

Perez v. Commodity Control Corp. (S.D. Fla.)

On January 20, 2016, the Secretary filed a complaint against Commodity Control Corp., David J. Pilger, and the Estate of William M. Pilger, fiduciaries of the Commodity Control Corp. ESOP, alleging that the defendants caused the ESOP to purchase employer common stock for greater than fair market value. David and William Pilger, who served as co-owners of Commodity Control Corp. and ESOP trustees, caused the ESOP to buy their entire ownership in the company for $9.1 million, thereby causing the ESOP to acquire 100 percent of the company. The complaint alleges that the defendants failed to obtain an accurate and current appraisal of the stock, ensure that the independent appraiser had accurate and complete financial information, perform a review of the valuation reports prepared by the appraiser, and question assumptions underlying the reports. The complaint seeks restitution of all losses and a permanent injunction barring the defendants from serving as fiduciaries to ERISA-covered plans. Atlanta Office

Solis v. Couturier (E.D. Cal.)

On March 1, 2016, the district court entered an amended consent order, expanding the injunction entered against David R. Johanson, an attorney and fiduciary who participated in ESOP stock transactions. This case was settled in March 2010 through consent orders that, along with a settlement in a related private action (Johnson v. Couturier), required defendants to pay $8 million into a settlement fund and $800,000 as a civil penalty and provided for additional contingent recoveries totaling about $3 to $7 million. The original consent order permitted Johanson to represent any ERISA-covered plan in a transaction as long as he represents no other party. The amended consent order expanded this by barring him from representing (or otherwise advising) any party concerning an ERISA plan transaction, subject only to a few narrow exceptions. Johanson agreed to the amended consent order as part of settling the Secretary's claim that, through his actions in other ERISA cases, he was in contempt of the Couturier consent order. The Secretary's complaint was filed on November 13, 2008 against Clair R. Couturier, Jr. and others in connection with two transactions involving an ESOP sponsored by The Employee Ownership Holding Company (TEOHC). Plan Benefits Security Division

Perez v. First Bankers Trust Services, Inc. (S.D.N.Y.)

On November 28, 2012, the Secretary filed a complaint against First Bankers Trust Services, Inc. and Maran, Inc., alleging that First Bankers caused the Maran ESOP to purchase employer stock for more than its fair market value. First Bankers, as the ESOP's trustee, allegedly relied on a valuation of Maran that projected the company would far exceed its historical financial performance, ignored Maran's heavy reliance on a single dominant customer, and improperly valued Maran by comparing it to companies that operated in a different segment of the apparel industry. The complaint also alleges that First Bankers' indemnification agreements with Maran were void as against public policy under ERISA section 410(a), as the agreements potentially required Maran - and by extension, the Maran ESOP, which owned 49% of Maran - to indemnify First Bankers for breaching its fiduciary duties. On March 22, 2013, the court denied First Bankers' motion to dismiss, in which First Bankers argued that its deference to a valuation expert insulated it from ERISA liability. The Secretary filed an amended complaint on April 1, 2013, adding as defendants Maran's top two executives, David Greenberg and Richard Huang, who appointed First Bankers as trustee and from whom the ESOP purchased the stock. The amended complaint contends that they failed to monitor First Bankers by failing to inform First Bankers of the inaccuracy of the information on which it relied in purchasing Maran stock. It also adds to the initial complaint's allegations against First Bankers, contending that First Bankers imprudently retained a valuation firm that had been recommended by the sellers' agent. On September 20, 2013, the parties entered into a consent order prohibiting First Bankers from seeking indemnification from Maran in the event that the court finds that First Bankers violated ERISA, in exchange for dismissing the Secretary's claim regarding indemnification. On April 23, 2014, the court denied a motion for judgment on the pleadings filed by Greenberg and Huang, in which they argued, among other things, that they were not ERISA fiduciaries. The parties subsequently filed cross motions for summary judgment. While the cross motions were pending, the Secretary and Greenberg and Huang agreed to a consent order and judgment, which the court entered on August 5, 2016. Greenberg and Huang were required to pay $909,091 to the Maran ESOP, plus a percentage of the sale price if Maran is sold within three years, and a civil penalty of $90,909. They also agreed to cause Maran to contribute $440,000, plus accrued interest, to the Maran ESOP to enable the ESOP to pay the entirety of an outstanding balance on a note. The Secretary's and First Bankers' cross motions for summary judgment were denied on September 28, 2016. Plan Benefits Security Division

Perez v. First Bankers Trust Services, Inc. (D. Vt.)

On December 28, 2016, the Secretary filed a complaint against First Bankers Trust Services, Sonnax Industries, Inc., and the company's former owners, alleging that the Sonnax Industries ESOP paid more than adequate consideration for company stock on January 3, 2011, when the company redeemed all outstanding shares from the owners for $48.8 million, and simultaneously issued new shares which it sold to the ESOP for $10 million. The complaint alleges that the valuation used by First Bankers, the trustee, to justify both the $48.8 million and $10 million purchases was fundamentally flawed, resulting in a significant inflation of the purchase prices and that the trustee failed to prudently investigate the transaction's merits. Boston Office

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Perez v. First Bankers Trust Services, Inc. and Frank Firor (S.D.N.Y.)

On November 28, 2012, the Secretary filed a complaint against the fiduciaries of the Rembar, Inc. ESOP, in connection with the ESOP's purchase of 100% of the plan sponsor's stock. The complaint alleges that First Bankers Trust Services, the trustee charged with determining the fair market value of Rembar's stock, failed to carry out a meaningful review of the valuation of the stock and caused the ESOP to overpay by at least $2.5 million. The complaint also alleges that Firor, the selling shareholder, was a knowing participant as well as a functional fiduciary because he appointed First Bankers but failed to monitor or remove it despite knowing that the ESOP overpaid him for his stock. First Bankers filed an answer and on March 8, 2013, Firor filed a motion to dismiss, arguing that he did not act in a fiduciary capacity and therefore, as a matter of law, cannot be held liable for the losses. On May 3, 2013, the Secretary filed an amended complaint, including additional facts supporting the Secretary's claim that Firor acted as a fiduciary. First Bankers filed an answer, and Firor again filed a motion to dismiss the amended complaint, maintaining that he did not act as a fiduciary. On August 15, 2013, the Secretary filed a brief opposing Firor's motion to dismiss, to which Firor filed a reply brief. On January 13, 2014, the court denied Firor's motion, holding that the Secretary had alleged sufficient facts to support his claim that Firor acted as a fiduciary. In January 2016, the Secretary reached a settlement agreement in principle with Firor for $1.2 million and the section 502(l) penalty. Firor filed a bar motion, which First Bankers opposed because it wanted greater reductions to its exposure as a result of the Secretary's settlement. The court endorsed the Secretary's position that First Bankers' exposure should be reduced by Firor's proportionate fault, but not by the amount Firor paid as a section 502(l) penalty. It also approved the Firor consent judgment and order dated May 4, 2016. Firor paid both the settlement amount and the penalty in May 2016. After an attempt at mediation in May 2016, First Bankers filed a motion for summary judgment on August 12, 2016. The Department filed its response and cross moved on November 8, 2016. First Bankers filed a reply on December 23, 2016. New York Office

Perez v. First Bankers Trust Services, Inc. and Vincent DiPano (D.N.J.)

On July 17, 2012, the Secretary filed a complaint against the fiduciaries of the SJP Group, Inc. ESOP, alleging that they caused the ESOP to purchase employer stock for millions of dollars in excess of the stock's fair market value. The Secretary alleges that GreatBanc, as the trustee charged with determining the fair market value of the stock, ignored obvious errors in the valuation report and failed to determine whether the financial information provided by the plan sponsor was reliable. The Secretary further alleges that SJP Group, Inc. and its president Vincent DiPano, as the fiduciaries that appointed GreatBanc as trustee, failed to monitor GreatBanc's performance and allowed the transaction to take place knowing that the purchase price was in excess of fair market value. The defendants filed separate motions to dismiss, which the court denied on May 31, 2013. The defendants filed motions for summary judgment and the parties filed various Daubert motions to preclude admission of each other's experts. On September 29, 2015, the court denied the motions for summary judgment and mostly denied the Daubert motions without prejudice. A pre-trial conference/settlement conference took place on November 16, 2015. At that conference, a settlement agreement in principle was reached with DiPano for $2.25 million and the section 502(l) penalty (conditioned on DiPano obtaining protection against subsequent claims for contribution from First Bankers). The parties filed a consent judgment on January 8, 2016. While the Secretary agreed with DiPano on the settlement terms and the need for a bar order, the parties disagreed on the bar order terms. The bar order terms were submitted to the court for decision: the First Bankers/DiPano terms (proportionate fault reduction and reduction for Di Pano's section 502(l) payment) were submitted on January 8, 2016. The Secretary's proposed terms (pro tanto reduction of First Bankers' liability and no reduction for section 502(l) payments) were filed on January 11, 2016. First Bankers filed its opposition to the Secretary's proposed terms on February 2, 2016, to which the Secretary replied on February 9, 2016. Short follow-up briefs on the effect of the proposed bar order language on claims for contribution were submitted on March 8, 2016. Oral argument was held on April 20, 2016. The court upheld the Secretary's position that section 502(l) penalties could not reduce First Bankers' compensatory remedy exposure but also agreed with First Bankers that its exposure should be reduced by DiPano's proportionate fault. Also on April 20, 2016, the court approved the DiPano consent judgment. The Secretary filed three motions in limine on various evidentiary issues on April 4, 2016 (most notably asking the court to take judicial notice of stock market performance of certain companies that were cited as"comparables" in the defendants' original valuation). Two of the three motions in limine were unopposed, the third motion (where the Secretary sought to exclude lay opinion testimony by defense witnesses on industry custom and practice) was denied without prejudice to renew at hearing. The Secretary also moved to preclude presentation of over thirty defense exhibits produced after close of discovery and entry of the pre-trial order. Pursuant to court order, the Secretary filed a supporting brief on this motion on May 6, 2016. The parties attempted a mediated settlement in May, 2016, but did not succeed. Trial began on May 23, 2016 and lasted for 16 full days until September 23, 2016. Briefs were filed on October 25, 2016 and replies filed on November 15, 2016. New York Office

Perez v. Ginsberg (S.D.N.Y.)

On February 11, 2015, the Secretary filed a complaint against the fiduciaries of the Laser and Skin Surgery Center of New York ESOP, alleging that they caused the ESOP to purchase employer stock for millions of dollars in excess of the stock's fair market value between August 2008 and February 2009. The Secretary alleges that the fiduciaries charged with determining the fair market value of the stock ignored critical and knowable errors in the valuation report and either failed to determine whether the financial information provided by the plan sponsor was accurate or relied on information they knew or should have known was materially wrong. New York Office

Perez v. Gruber Systems, Inc. (C.D. Cal.)

On May 29, 2015, the Secretary filed a complaint against Gruber Systems, Inc. and its CEO John Hoskinson, who is also the trustee of the company's ESOP, alleging that, in April 2008 and November 2009, the ESOP fiduciaries authorized payment of $2.6 million for company stock that was worth substantially less. Further, under the plan's terms, the funds used to buy the stock should have been segregated in accounts to provide benefits to already retired employees. On January 28, 2016, the court entered a consent judgment and order, requiring the company and Hoskinson to restore $1.1 million to the ESOP participants, removing Hoskinson as a fiduciary of the ESOP, and permanently barring him from serving as a fiduciary or service provider to any ERISA-covered plan. Newly-appointed trustees for the ESOP terminated and liquidated the ESOP, distributing all the plan assets to eligible participants and beneficiaries. Los Angeles Office

Perez v. Kimberly P. Hood, M.D. (N.D. Fla.)

On December 30, 2013, the Secretary filed a complaint against Kimberly P. Hood, M.D., P.A., Kimberly P. Hood, and Glenn M. Bankert, fiduciaries of the Kimberly P. Hood, M.D., P.A. ESOP, alleging that they failed to prudently exercise the shareholder rights to prevent and remedy mismanagement of the medical practice while the plan held an ownership interest in the practice and failed to properly determine the fair market value of the practice's stock, causing the plan to overpay for purchasing employer stock from participants receiving distributions. The parties reached an agreement in principle requiring the defendants to pay full restitution to the plan, terminate the plan and distribute the plan assets to the non-fiduciary plan participants, and be enjoined from acting as fiduciaries. The court stayed discovery while the parties complete the settlement process. Defendants named their counsel as an additional fiduciary to the plan. The new fiduciary is in the process of making restitution to the plan and distributing the restitution to the non-fiduciary participants. Supporting documentation was obtained, showing that $92,000 in losses has been restored to the plan. The consent judgment and order, filed on April 12, 2016 and entered on May 20, 2016, provides that the fiduciary defendants will be indefinitely enjoined from serving as fiduciaries, trustees, agents, or representatives in any capacity to any ERISA-covered plan. Atlanta Office

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Perez v. Mueller (E.D. Wis.)

On November 18, 2013, the Secretary filed a complaint against the fiduciaries of the Omni Resources, Inc. ESOP in connection with the ESOP's $13.7 million purchase of the company's stock for more than adequate consideration. The defendants include Veronica Mueller and Roger Mueller (Omni's owners, officers and board members and ESOP trustees), Alpha Investment Consulting Group, Inc. (special fiduciary to the ESOP for purposes of the ESOP stock purchase), and six trusts (which held Omni stock on behalf of the Muellers' children and sold that stock to the ESOP). The complaint alleges that, among other things, the price that the ESOP paid was based on a four month old valuation that had not been updated with financial information showing a severe downturn in the company's earnings and economic information showing a severe downtown in the business in which it engaged. On May 19, 2014, the court rejected defendants' motion to dismiss the Secretary's complaint and ruled that (a) the three-year limitation period in ERISA was not jurisdictional and that it may be tolled by agreement and (b) ERISA prohibited both direct and indirect sales of shares (rejecting defendants' argument that by first selling their shares to the company and then having the ESOP buy the shares from the company, they avoided engaging in a prohibited transaction). On October 15, 2014, the court granted the Secretary's motion to strike certain affirmative defenses, granted the Secretary's motion to dismiss defendants' first amended third-party complaint, and denied defendants' motion for leave to file a second amended third party complaint. On November 22, 2016, the magistrate judge, who was appointed to resolve discovery issues, denied the defendants' motion to compel testimony and, with the exception of two emails, denied the defendants' motion to compel production of documents. On December 27, 2016, the court adopted the magistrate's November 22 decision and order in its entirety. Chicago Office, Kansas City Office, and Plan Benefits Security Division

Perez v. PBI Bank, Inc. (S.D. Ind.)

On August 29, 2014, the Secretary filed a complaint against PBI Bank, also naming Dr. Michael A. Evans, in connection with the AIT Laboratories ESOP's June 30, 2009 purchase of AIT stock from Evans and others for more than its fair market value. The complaint alleged that PBI caused the ESOP to overpay for the stock by having the ESOP pay a"control" price for a 100% interest in AIT even though PBI knew, among other things, that: (a) the ESOP could not exercise control after it bought the stock because PBI had bound the ESOP to a contract requiring it to vote its shares in favor of keeping Evans in control of the company's board of directors after the sale; (b) at the beginning of the year, management had reported that AIT was worth only $5.2 million; and (c) the company's projections failed to account for the declining revenues that management and Evans knew was likely to occur. In September 2014, the Secretary reached a settlement with AIT requiring it to pay $2.1 million to the ESOP. In October 2014, the Secretary reached a settlement with the other AIT selling shareholders, requiring them to pay $1.5 million to the ESOP. PBI and Evans filed answers to the complaint on November 3, 2014. On May 24, 2016, the court entered an agreed order and judgment, which required the remaining defendants to pay a total of $3.47 million, directed the issuance of additional stock to the ESOP, granted the ESOP a lien of $5.9 million in properties controlled by Evans, required Evans to forgive $2.5 million debt owed by the ESOP, and required Evans to share proceeds of any future sale of his AIT stock. Combined with the previous settlements, the Secretary has recovered $7.1 million for the ESOP and $1,097,000 in civil penalties. Chicago Office and Plan Benefits Security Division

Perez v. Potts (S.D. Ohio)

On June 27, 2016, the Secretary filed a complaint against Thomas E. Potts and Fiduciary Trust Services, Inc., trustees of the Triple T Transport, Inc. ESOP. The complaint alleges that defendants approved a transaction in which the ESOP purchased 80% of the outstanding stock of Triple T Transport, Inc. for $17.46 million. The complaint also alleges that defendants knew or should have known that a valuation opinion on which they relied contained serious flaws, which resulted in the stock being significantly overvalued. As a result of the defendants' actions, the ESOP purchased the stock for a price in excess of fair market value, suffering losses in excess of $5.9 million. Cleveland Office

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Perez v. Sergio J. Cabrera, M.D. (N.D. Fla.)

On December 30, 2013, the Secretary filed a complaint against Sergio J. Cabrera M.D, P.L., Sergio Cabrera, and Robert S. Caputo M.D., alleging that the fiduciaries of the Sergio J. Cabrera M.D., P.L. ESOP failed to prudently exercise shareholder rights to prevent and remedy mismanagement of the medical practice while the plan held an ownership interest in the practice and failed to properly determine the fair market value of the practice's stock, causing the plan to overpay for the acquisition of employer stock from participants receiving distributions. On May 15, 2015, the Secretary filed a motion for summary judgment and moved to have the unanswered requests for admission deemed admitted. On June 11, 2015, the defendant filed a motion to mediate the case, but did not file a response to the motion for summary judgment. The court granted the motion to mediate, and the parties successfully mediated the case. On May 17, 2016, the court entered a consent judgment and order requiring restitution of $95,000 to the plan and permanently enjoining the fiduciary defendants, their agents, servants, employees and all persons in active concert or participation with them from violating Title I of ERISA. Atlanta Office

Tatum v. RJ Reynolds (4th Cir. and S. Ct.)

This was an appeal from a district court decision, following an earlier remand from the Fourth Circuit, holding that plan fiduciaries violated their procedural duties of prudence by selling stock in Nabisco after a corporate spin-off, but also holding that because a prudent fiduciary could have concluded that selling the stock was prudent given such factors as the general risk of holding a single-stock investment, the fiduciaries established that the plan participants were not economically harmed by their decision. The plaintiffs asserted that the proper standard is not what a hypothetical prudent fiduciary"could" have done, but what it"would" have done under the circumstances and appealed to the Fourth Circuit. The plaintiffs filed an opening brief on May 27, 2013, and the Department filed an amicus brief in support on June 25, 2013. The court, over a dissent, issued a favorable decision on August 4, 2014. The district court then applied the proper test and determined that a prudent fiduciary"would" also have divested the stock in the same timeframe. The plaintiffs appealed again and argued that the district court erred in its evaluation of the evidence under this test. In a response brief, the defendants re-raised the"could have" argument that was previously rejected by the Fourth Circuit, arguing that the Supreme Court's decision in Amgen v. Harris 136 S.Ct. 758 (2016) (per curiam) (vacating a lower court's decision in light of the guidance in Dudenhoeffer v. Fifth Third, 134 S.Ct. 2459 (2014)), calls into question the Fourth Circuit's prior holding. The Secretary filed another amicus curiae brief on September 9, 2016, urging the court to stand by its prior decision and reject the defendants' arguments based on Amgen. Plan Benefits Security Division

Perez v. TPP Holdings Inc. (W.D.N.C. and 11th Cir.)

On December 30, 2014, the Secretary filed a complaint against TPP Holdings Inc. and TPP's owner and chief executive officer Robert Nicholas Preston, alleging that the ESOP fiduciaries: (1) authorized the ESOP to purchase company stock in 2006 and 2008 for more than adequate consideration; (2) failed to act solely in the participants' interests; (3) failed to follow ESOP documents; and (4) engaged in self-dealing. The fiduciaries also allegedly permitted improper co-mingling of ESOP and corporate funds. The complaint further alleges that the ESOP did not exercise its voting rights in company decision-making, did not release the proper number of shares, and did not make the proper distributions to participants. On May 15, 2015, defendants filed a motion to dismiss, motion to stay pre-answer deadlines, and motion to extend time for defendants to file a responsive pleading. On June 1, 2015, the Secretary filed an opposition to defendants' motion to dismiss. On June 15, 2015, the defendants filed a reply. The defendants' motion to dismiss was predicated on arguments concerning enforceability of tolling agreements as to ERISA's six-year statute of limitations. The court granted the defendants' motion to dismiss, finding that ERISA's six-year statute of limitations is a statute of repose and cannot be waived or contractually tolled. The Secretary, citing Eleventh Circuit and Supreme Court precedent, filed a motion for reconsideration. On May 2, 2016, the court denied the Secretary's reconsideration motion, but the court invited the Secretary to file a motion for certification for interlocutory appeal. The Secretary filed the motion for interlocutory appeal on September 9, 2016. The defendants filed a response. The district court granted the Secretary's motion and certified the dismissal order for interlocutory review on November 22, 2016. The Secretary filed a petition for interlocutory review with the Eleventh Circuit on December 2, 2016, arguing that the ERISA six-year limitation is subject to waiver. Defendants filed a response on December 12, 2016. Atlanta Office and, on appeal, Plan Benefits Security Division

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Perez v. Vinoskey (W.D. Va.)

On October 14, 2016, the Secretary filed a complaint against Adam Vinoskey, who was the selling shareholder in an ESOP stock purchase that occurred in December 2010, Evolve Bank and Trust, which was the independent fiduciary hired to approve the transaction on behalf of the Sentry Equipment Erectors, Inc. ESOP, and its senior trust officer, Michael New, who approved the transaction price and the structure of the transaction. The complaint alleges that the ESOP paid $20.7 million for the company's stock that was worth only about $13 million and that the debt taken on to fund this transaction lowered the value of the ESOP stock that had already been allocated to participant accounts from a prior stock purchase that had occurred several years Earlier, and the fiduciaries took no action to protect existing participants from this drop in the value of the shares that they owned before the 2010 transaction. The total value of both claims is $13.34 million. Philadelphia Office

Whitely v. BP (5th Cir.)

This is an interlocutory appeal from a district court decision, following a remand from the Fifth Circuit after the Supreme Court's decision in Dudenhoeffer v. Fifth Third, 134 S.Ct. 2459 (2014). In a prior decision, the district court dismissed the plaintiffs' complaint based on the Moench presumption, which protected fiduciaries of ESOPs with publicly traded employer stock from liability except in certain limited circumstances. Plaintiffs appealed the decision to the Fifth Circuit. After the Supreme Court rejected the presumption in Fifth Third, the Fifth Circuit vacated the prior decision and remanded the case. On remand, the district court discussed the two pleading issues raised in the Fifth Third decision: first, what actions may a fiduciary undertake that is consistent with the securities law when the fiduciary knows or should know that a securities fraud affects the employer stock and second, whether the fiduciary could not have concluded that potential alternative actions would do more harm than good to the plan. The plaintiffs moved to amend their complaint to address these issues, and defendants opposed. In its March 4, 2015 decision, the district court permitted the plaintiffs to file an amended complaint. In the same decision, the district court issued an order certifying these pleading issues for interlocutory appeal. On May 21, 2015, the Fifth Circuit took the case on interlocutory review. On appeal, the Secretary and the Securities and Exchange Commission (SEC) filed concurrent amicus briefs on March 11, 2016. In these briefs, the Secretary and the SEC analyzed a prudent fiduciary's possible actions when confronted with securities fraud. The briefs focused on the plaintiffs' proposed actions: either disclosing the underlying fraud to the public or stopping the ESOP's purchase and sale transactions. The SEC argued that these alternative actions did not conflict with the securities laws. The Secretary argued that a prudent fiduciary could not have concluded these actions would do more harm than good to the ESOP. On September 26, 2016, the Fifth Circuit issued an unfavorable decision. First, the court concluded that "the district court [had] erred when it altered the language of Fifth Third to reach its holding." According to the Fifth Circuit, the proper formulation of Fifth Third's more-harm-than-good test is whether a plaintiff has alleged"an alternative course of action so clearly beneficial that a prudent fiduciary could not conclude that it would be more likely to harm the fund than help it." The court also determined that the plaintiffs had not plausibly alleged facts and allegations supporting an alternative action that could satisfy Fifth Third. Plan Benefits Security Division

B. Financing the Employer

1. Collection of Plan Contributions and Loan Repayments

Perez v. Anstett (D.N.D.)

On March 1, 2016, the court entered a consent judgment and order settling allegations in the complaint, filed on July 15, 2015, that the Mathison Company, Marilyn Anstett, and Paul Anstett, who are the company's president and vice president and plan trustees, failed to remit and to timely remit employee contributions and loan repayments to the company's 401(k) Plan and failed to properly administer its ESOP. The consent judgment confirmed the complaint allegations and ordered, among other things, the defendants to pay $14,066.34 to 401(k) plan participants, to terminate the 401(k) plan, and freeze and to take steps to properly administer the ESOP. The court also ordered them to complete ten hours of fiduciary training. Denver Office

Perez v. Aware Environmental Inc. (W.D.N.C.)

On December 23, 2014, the Secretary filed a complaint against Aware Environmental Inc. and Michael Omstead Smith, alleging that between January 8, 2010 and April 16, 2011, they failed to remit and to timely remit $26,155.76 in employee contributions to the company's 401(k) Profit Sharing Plan and that from September 5, 2006 through March 20, 2007, they failed to remit participant loan repayments. As a result, one participant loan was deemed in default, and the participant suffered tax consequences. The complaint sought an order requiring defendants to restore all losses to the plan, including interest, requiring the plan to set off the individual account of Smith against the amount of the losses, appointing a successor fiduciary or administrator at the defendants' expense, and permanently enjoining the defendants from violating title 1 of ERISA and from serving as a fiduciary, administrator, officer, trustee, custodian, agent, employee, or representative of, or from having control over the assets of, any ERISA-covered plan. The defendants failed to answer, and the Secretary obtained a clerk's entry of default. The court entered default judgment on April 4, 2016. Atlanta Office

Perez v. Bonner (D. Minn.)

On January 8, 2015, the Secretary filed a complaint against John F. Bonner and Bonner & Borhart, LLP, fiduciaries of the Bonner & Borhart, LLP SIMPLE IRA Plan, alleging that between 2009 and 2014, they failed to remit $23,334.63 in employee contributions to the plan and failed to timely remit $133,127.53 in employee contributions to the plan. On May 5, 2016, the court entered a consent order and judgment ordering the fiduciaries to restore to the plan $23,335 in unremitted contributions and $9,659 in lost earnings, and enjoining the fiduciaries from violating ERISA and from serving as fiduciaries or service providers to any ERISA-covered plan. Chicago Office

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Perez v. Brunk (E.D. Cal.)

On June 29, 2015, the Secretary filed a complaint alleging that James Brunk and Brunk Industries Inc. failed to collect prevailing wage contributions for the benefit of the company's employees. Following discovery and the exchange of settlement offers, on April 18, 2016, the court issued a consent judgment and order requiring the plan fiduciaries to restore $100,000 to the plan and permanently barring James Brunk and the company from serving as fiduciaries or service providers to any ERISA-covered plan. In addition, an independent fiduciary was appointed to wind up and liquidate the plan. Seattle Office

Perez v. Carolina Crawler & Equipment of Charleston Inc. (D.S.C.)

In 2015, the Secretary filed a complaint against Carolina Crawler & Equipment of Charleston Inc., Susan Mills, and Glenn Perry Mills, alleging that from January 2008 to January 2012, the defendants failed to remit $43,386 in employee contributions to the company's SIMPLE IRA Plan in a timely manner. On March 11, 2016, the court approved a consent judgment and order, in which the defendants admitted to each allegation in the complaint and agreed to restore $48,734 in losses to the plan, with the defendants and their son waiving their account balances. Atlanta Office

Perez v. Carr Freight (D. Minn.)

On November 11, 2015, the Secretary filed a complaint against Carr Freight Systems, Inc., fiduciary of its 401(k) Plan, alleging that Carr Freight failed to terminate the plan and issue distributions in the amount of $1,723.38 to the two plan participants. On September 15, 2016, the court entered a default judgment removing the defendants as fiduciaries to the plan, permanently enjoining them from acting as fiduciaries or service providers to any ERISA-covered plan, and appointing an independent fiduciary to terminate the plan. Chicago Office

Perez v. Chainani (S.D. Tex.)

On April 20, 2015, the Secretary filed an amended complaint against AARC Environmental, Inc. (AARC) and Kishore Chainani, AARC's sole owner. The original complaint, filed on December 26, 2014, alleged that they failed to forward employee contributions and loan repayments to the company's 401(k) Plan since December 29, 2007, resulting in more than $78,000 in losses. The amended complaint alleges that AARC and Chainani failed to remit all employee and employer premiums to the company's Group Health Plan and allowed coverage to lapse multiple times since 2011, as a result of which they owe participants more than $40,000 in employee premiums and an additional unknown amount for unpaid medical claims. On September 20, 2016, the court entered a default judgment against AARC and Chainani, granting full relief and awarding more than $86,000 in losses for the 401(k) Plan and more than $40,000 in losses for the Health Plan to 49 participants and beneficiaries. Defendants are also required to hire an independent fiduciary at their own expense and are barred from acting as fiduciaries in the future once the independent fiduciary is in place. Dallas Office

Perez v. Claxton (E.D. Mo.)

On December 30, 2015, the Secretary filed a complaint against James M. Claxton, owner of Claxton Consulting Engineers, Inc., alleging that Claxton, as trustee of the company's 401(k) and Health Plans, failed to forward $10,720.33 in employee contributions to the 401(k) Plan and failed to forward $1,363.38 in employee contributions to the Health Plan during 2006 to 2009. The defendant accepted service but failed to file an answer. On July 1, 2016, the Secretary filed a default judgment motion by direction of the court. The motion is pending. Kansas City Office

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Perez v. Coffman (W.D. Okla.)

On July 22, 2016, the Secretary filed a complaint against Larry Coffman, fiduciary and owner of Centerpointe Resources, Inc. alleging that Coffman and Centerpointe failed to remit and to timely remit employee contributions and participant loan repayments to the company's 401(K) Profit Sharing Plan and Trust beginning on January 11, 2011, resulting in approximately $76,000 in plan losses owed to 25 employees. Dallas Office

Perez v. Coffman (E.D. Wis.)

On November 23, 2015, the Secretary filed a complaint against Gregory Coffman and Downey, Inc., fiduciaries of the company's Profit Sharing Plan, alleging that they failed to terminate the plan and issue distributions in the amount of $35,665.90 to 20 plan participants. On December 9, 2016, the court entered a default judgment removing the defendants as fiduciaries to the plan, appointing an independent fiduciary to terminate the plan, and ordering that the defendants cooperate with and pay the cost of the independent fiduciary. See also Perez v. Coffman, Section K. Orphan Plans. Chicago Office

Perez v. Cullen (D. Del.)

On June 29, 2015, the Secretary filed a complaint against Thomas Cullen, president of Thomas E. Moore, Inc., and fiduciary of the Thomas Moore, Inc./Video Scene of Delaware SIMPLE IRA Plan and against Thomas E. Moore, Inc., the plan administrator, alleging that they failed to remit employee contributions to the plan from December 2011 through May 2013, and failed to collect employer contributions due to the plan beginning in July 2010. The complaint seeks restitution, appointment of an independent fiduciary, and a permanent injunction barring the defendants from serving as fiduciaries to any ERISA-covered plan. The defendants waived service, and all deadlines are stayed pending the outcome of settlement discussions. Philadelphia Office

Perez v. Demmy (S.D. Ohio)

On May 23, 2016, the Secretary filed a complaint against Demmy Sand & Gravel, LLC, Amy Demmy and the company's Retirement Savings Plan, alleging that the fiduciaries failed to segregate and remit $2,409.65 in employee contributions and $32,883.34 in loan repayments and failed to timely remit loan repayments. The Secretary also alleges the fiduciaries failed to collect $264,750.36 in prevailing wage contributions. The complaint seeks an order requiring that Amy Demmy restore all losses to the plan with interest, removing her as a fiduciary, enjoining her from being a fiduciary or service provider to any ERISA-covered plan, and appointing an independent fiduciary to administer the plan. Cleveland Office

Perez v. Draeger Construction (N.D. Cal.)

On October 8, 2015, the Secretary filed a complaint against fiduciaries Draeger Construction, Inc., Draeger Construction, LLC, and Jeffrey Draeger, alleging that before the companies went out of business in October 2012, Draeger continued to withhold employee contributions but failed to pay monthly health insurance premiums to the plan's insurers, resulting in retroactive cancellation of participants' medical coverage. Participants were not timely notified that they were at risk of losing their coverage, and in fact lost that coverage, and had no reason to suspect their coverage was in jeopardy given the fact that their weekly paychecks continued to withhold employee contributions. After their coverage lapsed due to nonpayment of premiums, several participants incurred substantial unpaid medical expenses. On January 29, 2016, the parties entered into a consent judgment and order requiring Draeger to restore to affected participants $94,174 in uncovered medical claims and outstanding employee contributions and permanently enjoining him from serving as a fiduciary to any ERISA-covered plan. San Francisco Office

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Perez v. FCJ, LLC(D. Mass.)

On July 11, 2016, the Secretary filed a complaint alleging that Frederick Jaffe and FCJ, LLC d/b/a EPS Communications, the fiduciaries of the EPS Communications 401(k) Plan, failed to transmit employee contributions to the plan in the amount of $21,876.12 from September, 2010 to March, 2011. On July 12, 2016, the court entered a consent judgment requiring the fiduciaries to pay, through offset and cash, $29,342.07, which includes lost income, and permanently barring Jaffe from being a fiduciary to any ERISA-covered plan. The fiduciaries also agreed to maintain the fiduciary bond, file Forms 5500 in a timely manner, and distribute Summary Annual Reports in a timely manner. Boston Office

Perez v. Fletcher-Thompson and Michael S. Marcinek (D. Conn.)

The Secretary filed a complaint on June 9, 2014 against Fletcher-Thompson and Michael S. Marcinek, the company's president, managing partner, and majority owner, for failing to remit employee deferred contributions and loan repayments to the company's Savings Plan. The company, which is operational, became delinquent in remitting employee deferrals and loan repayments to the plan beginning in 2008, and ceased remitting anything as of May 2012; nevertheless, it continued to withhold contributions and loan repayments from participants' pay. The amount outstanding, including lost interest, was $485,560.77. Rather than answer, the defendants agreed to a consent judgment requiring them to restore the amount due through a one-year installment payment arrangement, with post-judgment interest accruing on the unpaid balance. It also bars Marcinek from serving as a fiduciary in the future to any ERISA-covered plan. When it became apparent that the defendants were not making the monthly installment payments, the Secretary filed, on July 7, 2015, a motion to re-open the case and a petition for the adjudication of civil contempt. The parties renegotiated the payment terms. The modified consent judgment, filed on January 28, 2016, requires catch-up payments, an offset of the funds in Marcinek's plan account, and revised monthly payments, including all accrued post-judgment interest, to be completed by September 2016. The modified consent judgment also requires that stricter penalties be imposed should defendants fail to comply with the agreed-upon terms. All subsequent payments have been timely made. Boston Office

Harris v. Forms Plus Inc. (N.D. Ala.)

On August 30, 2013, the Secretary filed a complaint against J. Len Howell and Forms Plus Inc. for failing to remit employee contributions to the company's Money Purchase Pension Plan. The lawsuit seeks restitution, along with lost earnings, removal of Howell as a plan fiduciary, and a permanent injunction preventing Howell from serving as a fiduciary to any ERISA-covered plan. On September 23, 2016, the court approved a consent judgment and order requiring that the fiduciaries restore losses to the plan in five $1,000 monthly installments, beginning November 15, 2016, that an independent fiduciary be appointed, and that the defendants be enjoined from committing further violations of Title I of ERISA. Atlanta Office

Perez v. Geary Construction Inc. (D. Utah)

On October 18, 2016, the Secretary filed a complaint against Geary Construction and Deann Geary, alleging that they failed to remit employee contributions to the company's retirement plan and failed to appropriately pay claims from its self-funded health plan. On December 13, 2016, the court issued a consent judgment and order, which provides that the fiduciaries are jointly and severally liable for $22,146.07 in unremitted contributions to the retirement plan and for $285,544.08 in unpaid medical claims to the health plan. Geary is required to wind down the retirement plan by the end of 2016. After termination of the plan, defendants are permanently enjoined from future service as fiduciaries or service providers to any ERISA-covered plan. See also Perez v. Geary Construction Inc., B.3. Miscellaneous. San Francisco Office

Secretary v. Global Research Services, LLC (D. Md.)

On January 26, 2016, the Secretary filed a complaint against Global Research Services, LLC and Julie Garrett, trustee of the company's 401(k) Plan, seeking restitution of approximately $221,000.00 in unremitted employer safe harbor contributions and lost opportunity costs on untimely remitted employee contributions for plan years 2010 through 2013. On July 22, 2016, the Secretary moved for a default judgment, which the court granted on August 29, 2016. Philadelphia Office

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Perez v. H.C. Watson Corp. d/b/a Interim Healthcare (D. Mass.)

On October 6, 2014, the Secretary filed a complaint against H.C. Watson Corp., its president and CEO, and former COO, alleging that, from 2011 to 2014, the fiduciaries failed to remit approximately $122,000 in employee contributions and $30,000 in loan payments to the company's 401(k) Plan. On March 1, 2015, the Secretary filed a consent judgment against the company and its president and CEO in the amount of $144,336.72. The company has ceased operations, and the company and the CEO owe millions of dollars to the IRS, rendering both essentially judgment proof. After long negotiations and cooperation between the Department and counsel for the company and CEO, three insurance carriers holding relevant policies - one a general crime policy and the other two fidelity bonds - agreed to pay the entire amount due. The full amount due was paid. A default judgment for additional opportunity losses was entered on June 20, 2016 against the former COO, who did not answer the complaint. Boston Office

Perez v. Hanco, Inc. (N.D. Ind.)

On September 19, 2014, the Secretary filed a complaint against Hanco, Inc. d/b/a Classico Seating, Harry T. Richardson Jr., and the Hanco, Inc. 401(k), Health, and Dental Plans, alleging that the fiduciaries failed to remit $5,242.08 in employee contributions to the 401(k) Plan from October 14, 2011 through February 17, 2012, failed to remit $22,863.09 in employee insurance premium contributions to the Health Plan from August 5, 2011 through September 30, 2011, and failed to remit $2,282.60 in employee insurance premium contributions to the Dental Plan from February 4, 2011, through May 20, 2011. Richardson filed an answer on February 6, 2015. Hanco did not file an answer. On February 27, 2015, the Secretary filed a motion to strike five of Richardson's affirmative defenses. The court granted the motion to strike on March 20, 2015. The Secretary filed a motion for default judgment with respect to Hanco on July 22, 2015. The court granted the motion on October 15, 2015. On March 4, 2016, the Secretary filed a Rule 26(f) Report. On June 28, 2016, the court set a Rule 16 preliminary pretrial conference for July 11, 2016. The defendant did not attend the preliminary pretrial conference. On August 10, 2016, the court ordered the defendant to pay $671.07 in costs to the Secretary for failure to appear at the conference. Chicago Office

Perez v. Hayes (N.D. Ohio and Bankr. N.D. Ohio)

On October 8, 2013, the Secretary filed an adversary complaint in the bankruptcy case of Clark Hayes, alleging that losses to the Applied Technology Systems, Inc. Retirement Plan resulting from Hayes' failure to remit employee contributions to the plan are non-dischargeable in bankruptcy. On March 20, 2014, the bankruptcy case was dismissed, and on April 9, 2014, the bankruptcy court closed the adversary proceeding. The defendants failed to answer the complaint. On June 18, 2014, the Secretary filed a motion for a default judgment and then filed an amended motion for default judgment on February 6, 2015. Default judgment was entered on July 10, 2015, and the corrected judgment was entered on July 29, 2015. The judgment requires Hayes and Applied Technology Systems, Inc. to pay $17,167.69 to the plan, bars the defendants from being fiduciaries or service providers to any ERISA-covered plan, and appoints an independent fiduciary to administer and terminate the plan. In a second case against Hayes, the Secretary filed a complaint in district court on June 24, 2015, to recover plan assets that were improperly transferred to a general account and used for non-plan purposes. The defendants again did not answer the complaint. On December 8, 2015, the Secretary filed a motion for default judgment, which the court granted on February 8, 2016. The judgment requires Hayes and the company to pay $111,331.71, plus lost opportunity costs, and to cooperate with the independent fiduciary. Cleveland Office

Perez v. Hicks (D. Md.)

On April 16, 2015, the Secretary filed a complaint against Brian Hicks, fiduciary of the Trojan Horse LTD 401(k) Plan, and Trojan Horse LTD, Capitol Expressways, Inc., Glen Burnie Hauling, Inc., and BDG Logistics LLC, the four companies owned by Hicks whose employees participated in the plan. The complaint alleges that from June 2011 until the companies ceased operations in 2013, the companies, through Hicks, failed to remit and timely remit employee contributions to the plan. It also alleges that neither Trojan Horse nor Hicks took sufficient steps to terminate the plan when the companies ceased doing business. The defendants failed to answer the complaint and the court entered a default judgment on May 31, 2016, removing the plan fiduciaries, permanently barring them from serving as fiduciaries to any ERISA-covered plan, holding the defendants jointly and severally liable for the missing contributions, and appointing an independent fiduciary to terminate the plan. Arlington Office

Perez v. Hobbs, Upchurch and Associates, P.A. (M.D.N.C.)

On September 28, 2015, the Secretary filed a complaint against Hobbs Upchurch and Associates P.A. and Frederick M. Hobbs, alleging that between April 2012 and September 2012, the defendants failed to remit $22,475 in employee contributions to the company's 401(k) Plan and that between April 2013 and October 2013, the defendants failed to remit $2,659 in participant loan repayments to the plan. The complaint seeks an order requiring the defendants to restore to the plan all losses, including lost opportunity costs, requiring the plan to offset the individual plan accounts of defendant against the amount of losses, removing the defendants as the plan fiduciaries, and appointing an independent fiduciary at the defendants' expense. Additionally, the complaint seeks to enjoin the defendants from violating Title I of ERISA and from serving as a fiduciary, administrator, officer, trustee, custodian, agent, employee, or representative of, or having control over the assets of, any ERISA-covered plan. Atlanta Office

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Perez v. Kaminski (N.D. Ill.)

On December 30, 2015, the Secretary filed a complaint against Earl Kaminski, fiduciary of the AMI Associates Group, Inc. 401(k) Plan, alleging that he failed to remit $7,374.00 in employee contributions to the plan from January 1, 2010 to December 31, 2013. On June 6, 2016, the court entered a default judgment ordering restoration of $8,171.21 to the plan, removing the defendant as a fiduciary to the plan, and enjoining the defendant from serving as a fiduciary or service provider to any ERISA-covered plan. Chicago Office

Perez v. Kann (D. Md.)

On July 26, 2016, the Secretary filed a complaint against Donald Kann and his company, Kann & Associates, Inc. t/a Kann Partners. From July 28, 2010 through July 1, 2012, defendants failed to remit $56,065.27 in employee 401(k) contributions to the company's 401(k) Plan resulting in excess of $34,000.00 lost opportunity costs on the delinquent and untimely remitted employee contributions. As of December 31, 2014, the plan had 20 participants and assets totaling $2,281,531. The defendants waived service and filed an answer on January 25, 2017. Philadelphia Office

Secretary v. Keever (N.D. Tex.)

On August 24, 2016, the Secretary obtained a consent judgment and order that affirmed the complaint allegations, found that the defendants violated ERISA, and awarded full restitution and injunctive relief. The complaint, filed on January 14, 2016, alleged that David Keever and his company, J.E. Keever Mortuary, had failed to remit employee contributions and failed to take any action to collect mandatory employer contributions owed to the company's SIMPLE IRA Plan for a five-year period. The judgment confirmed that the fiduciaries had caused $53,764 in plan losses, ordered the defendants to make full restitution, and enjoined them from further violations. The judgment also orders Keever to take no less than eight hours of formal education and training on fiduciary duties and responsibilities. Dallas Office

Solis v. Kineticsware, Inc. (W.D. Wash.); Solis v. Sampson (In re Sampson) (Bankr. W.D. Wash.)

Throughout 2015 and 2016, the court continued to hold regular status conferences in an attempt to increase the amounts paid by Sampson to the Kineticsware, Inc. 401(k) Plan pursuant to previous court orders. In June 2016, Sampson increased his monthly payment. Barnett, who is jointly and severally liable, presented updated financial statements in April 2016, and the Department calculated, according to an agreed-upon formula, an updated increased monthly payment which he is now required to pay. On February 4, 2014, the Secretary filed a petition for civil contempt and a request for an order to show cause because Sampson was nearly one year delinquent under the terms of his payment plan. On June 13, 2014, the court ordered Sampson to pay at least $750 per month toward the judgment, ordered him to consider a stock pledge, and reminded Sampson that penalties could be imposed on him if he fails to make the required payments. The Secretary first filed a petition for civil contempt against Sampson on February 28, 2013, because Sampson was similarly significantly delinquent, but withdrew it following Sampson's tender of approximately $11,000 that was past due. The Secretary's district court complaint, filed on November 15, 2010 against Kineticsware, Inc., Jeffrey Sampson and Richard Barnett, alleged that they failed to collect and remit $222,316 in employer contributions to the company's 401(k) Plan for plan years 2007-2008. The Secretary had filed an adversary complaint on October 26, 2009 in Sampson's Chapter 7 bankruptcy case, seeking a determination that his debt to the plan is non-dischargeable. On January 9, 2012, the court entered a consent judgment, finding that Sampson and Barnett are jointly and severally liable for $200,610 in losses due non-fiduciary participants, permanently enjoining them from future fiduciary service to any ERISA-covered plan, and requiring them to pay for the costs of an independent fiduciary to administer the plan. See also Solis v. Kineticsware, Inc.; Solis v. Sampson (In re Sampson), Section L. Contempt and Subpoena Enforcement. Seattle Office

Perez v. Kwasny (E.D. Pa.)

On July 16, 2014, the Secretary filed a complaint alleging that, from 2007 through 2009, Richard J. Kwasny and the law firm of Kwasny & Reilly, P.C. failed to ensure that discretionary employee contributions to the firm's 401(k) Profit Sharing Plan were remitted and remitted on a timely basis. The defendants filed an answer to the complaint on October 29, 2014. On November 7, 2014, the Secretary filed a motion to strike the company's answers, which the court granted on November 19, 2014. On December 1, 2014, the clerk of the court entered default against the company. On July 2, 2015, the court granted the Secretary's motion to compel complete responses to the Secretary's first set of interrogatories and requests for production of documents. Following Kwasny's failure to appear at a July 7, 2015 deposition, the Secretary filed a motion for sanctions that was held under advisement. On July 20, 2016, the court granted the Secretary's motion to deem admitted the plaintiff's request for admissions. On September 8, 2015, Kwasny was ordered to attend his deposition. On August 12, 2015, the Secretary filed a motion for summary judgment against Kwasny and a motion for default judgment against Kwasny & Reilly. Kwasny filed a response and cross-motion for summary judgment on September 23, 2015. The court granted the Secretary's motions on February 9, 2016 and awarded $40,416.30 in damages. Kwasny appealed the court's finding of liability to the Third Circuit Court of Appeals. The appellant raised statute of limitations and res judicata issues on appeal, arguing that the Secretary had actual knowledge more than three years before the lawsuit and that a judgment against him in a state court action offsets the damages in this case. The individual defendant appealed on April 7, 2016. The appellant filed his opening brief on July 11, 2016, and the Secretary's response brief was filed on August 10, 2016. No oral argument was scheduled; the case was submitted on the briefs on November 7, 2016. Philadelphia Office and, on appeal, Plan Benefits Security Division

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Perez v. Lapensohn (E.D. Pa. and Bankr. E.D. Pa.)

On June 12, 2015, the Secretary filed a complaint against Howard Lapensohn and Lapensohn Accounting Professionals, LLC alleging that between April 2008 and December 2011, they failed to remit elective employee deferrals to the plan, and failed to make matching employer contributions. On June 30, 2015, the court entered a consent judgment requiring defendants to restore $36,828.10 to the plan. The defendants did not make any of the required payments. On March 31, 2016, Howard Lapensohn filed for personal Chapter 11 bankruptcy protection. On June 29, 2016, the Secretary filed a consent order providing that the debt owed to the plan was not dischargeable. The court entered this order on August 5, 2016. The bankruptcy case was dismissed on August 11, 2016 for Lapensohn's failure to file debtor in possession reports. Philadelphia Office

Perez v. Laurens (N.D. Ill.)

On August 24, 2015, the Secretary filed a complaint against Jonathan Laurens, Katherine Birchfield, Laurens Restoration, Inc. d/b/a Laurens Board-Up, and the Laurens Restoration, Inc. 401(k) Plan alleging that from January 4, 2010 through October 5, 2012, defendant fiduciaries failed to remit employee salary deferral contributions to the plan and, from January 4, 2010 through October 5, 2012, defendants failed to timely remit employee contributions to the plan. On June 16, 2016, the court entered a consent order and judgment requiring defendants to restore $43,527.71 to the plan. The judgment also enjoined the defendants from serving as fiduciaries or service providers to any ERISA-covered plan and appointed an independent fiduciary to the plan. Chicago Office

Perez v. Law Partners LLC (N.D. Ala.)

On April 28, 2015, the Secretary filed a complaint against Law Partners LLC and Milton Bryan Peeples, fiduciaries of the Law Partners LLC 401(k) Salary Reduction Plan, alleging that between January 2007 and December 2010, the fiduciaries withheld $64,725 in employee contributions but never forwarded them to the plan. The Secretary's complaint asks the court to order the defendants to restore the losses, including lost earnings, to the plan, set off the individual plan account of the defendant against the losses, and permanently enjoin defendants from serving as fiduciaries to any ERISA-covered plan and from violating Title I of ERISA in the future, and appoint a successor fiduciary to the plan. When defendants did not answer the complaint within the time required, the court issued an order for default judgment on May 16, 2016. On July 7, 2016, the court issued an order appointing an independent fiduciary for the plan. Atlanta Office

Perez v. Lewis (N.D. Ill. and Bankr. N.D. Ill.)

On March 31, 2016, the Secretary filed a complaint against Michael Lewis, trustee of the Acme Orthotics and Prosthetic Laboratories, Inc. Profit Sharing 401(k) Plan and Trust, and Monica Fox, the company's executive director, alleging they failed to remit $39,391.17 in employee salary deferral contributions and loan repayment contributions to the plan from July 2010 through April 2012. In addition, the complaint alleges that Lewis misappropriated $66,431.99 in plan assets from April 2012 through March 2015. On November 15, 2016, the parties agreed on the principle terms of a consent order and judgment, including the amount of losses owed, the method of restoration of losses, and injunctive relief. On March 31, 2016, the Secretary also filed a complaint in the bankruptcy court alleging that the debts Lewis owes to the plan are non-dischargeable. On August 8, 2016, the bankruptcy court entered a consent order and judgment finding that the $115,167.99 debt Lewis owes to the plan is non-dischargeable. Lewis will repay all losses pursuant to his Chapter 13 plan, which the bankruptcy court previously approved. Chicago Office

Perez v. Mashali (D. Mass. and Bankr. D. Mass.)

On November 12, 2010, the Secretary filed a complaint against Dr. Fathalla Mashali, trustee of the Northern Rhode Island Anesthesia Associates, P.C., Retirement Plan and Trust, alleging that he failed to ensure that employee contributions were remitted to the plan and failed to take measures to collect employee and employer contributions for the 2006, 2007 and 2008 plan years. Mashali filed for bankruptcy protection. The Secretary filed an adversary complaint in bankruptcy court in June 2010, seeking to have Mashali's debt declared non-dischargeable. On December 22, 2010, the district court granted the Secretary's motion for withdrawal of reference and to have the adversary proceeding consolidated with the district court case. On October 17, 2011, the court appointed an independent fiduciary, who was successful in enabling participants to access funds in the 401(k) component of the plan, which had been frozen by the third party administrator pending payment of overdue qualified non-elective contributions. The Department ultimately determined that Mashali is responsible, pursuant to employment agreements he entered into with about 40 doctors and assistants, for that portion of unpaid contributions constituting deferred employee contributions. He has paid some employees through informal arrangements or settlements in private suits but still owes $1.7 million. With his personal bankruptcy and the revocation of his medical licenses in Massachusetts and Rhode Island, Mashali lacked the ability to pay. Once Mashali was indicted for Medicare fraud and held without bail in February 2014, the Department's attempts at consensual negotiations ceased. In December 2014, the Department filed a motion for summary judgment seeking to have the court find Mashali liable for the $1.7 million debt. Mashali filed a cross-motion for summary judgment. Oral argument was held before a magistrate judge, who found that for a subset of participants whose employment contracts provided for a reduction in their compensation for contributions to their pension plan, such contributions would be deemed employee contributions and, as such, are plan assets, but he recommended that the court deny summary judgment for both parties. After oral argument on objections to the magistrate's recommendation, the district court adopted the magistrate's report and recommendation denying both motions for summary judgment. In the interim, Mashali's attorney withdrew. Inasmuch as the Department was prepared to go to trial, Mashali requested and the court granted a competency evaluation in the criminal matter. The criminal court determined that Mashali is competent to stand trial. The civil case has been stayed until the criminal matter is finished. Boston Office

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Perez v. Massey Wholesale Co. Inc. (S.D. Ga.)

On February 26, 2015, the Secretary filed a complaint against Massey Wholesale, Inc., Larry W. Massey as Executor of the State of Mary S. Massey, and Larry W. Massey, alleging that from October 3, 2008 through August 3, 2012 they failed to forward $38,986.70 in employee contributions to the company's SIMPLE IRA Retirement Plan and also allowed the funds to be commingled with general company assets. In addition, from January 4, 2008 through August 3, 2012 the defendants withheld employee contributions but failed to timely forward them to the plan, resulting in $19,471.35 in lost earnings owed to the non-fiduciary plan participants. On December 10, 2015, the Secretary and defendants filed a motion to approve a consent judgment and order, which would result in restitution of all losses to the plan. On April 26, 2016, the court approved the parties' consent judgment and order. Atlanta Office

Perez v Michelson (W.D. Tex.)

On July 11, 2015, the Secretary filed a complaint against Michelson Energy Co., its owner Mitchell Michelson, and two other company officials, Robert Fannin and Barry DeWitt, alleging that beginning in July 2009, Michelson, Fannin and DeWitt failed to remit and to timely remit contributions and loan payments to the company's 401(k) and Profit Sharing Plan. Losses are estimated at $126,000 and affect 26 employees. The complaint seeks restitution and an order barring Michelson, Fannin and DeWitt from serving in any capacity to any other ERISA-covered plan. On July 27, 2016, the Secretary obtained a partial consent judgment with Michaelson, DeWitt and the company, establishing the alleged violations and liquidating $126,839.76 in plan losses and $19,633.63 in lost opportunity costs. The partial consent judgment orders the parties to commence restitution and to undertake other actions commensurate with their fiduciary duties. On August 16, 2016, the Secretary filed a motion for default judgment against the remaining defendant, Fannin. Dallas Office

Perez v. Mirabile (D. Kan.)

On October 31, 2016, the Secretary simultaneously filed a complaint and motion for consent judgment against Dr. James Mirabile. The complaint alleged that as trustee of two pension plans, Mirabile made insufficient mandatory employer contributions or, in some cases, no contributions at all, allowed the vested account balances of participants to be improperly forfeited (and used these forfeited assets to offset mandatory employer contributions), and allowed investment earnings to be allocated inequitably and/or not allocated as required by plan documents. Additionally, the Secretary alleged that Mirabile failed to monitor the certified public accountant hired to provide recordkeeping service to the plans and paid him over $10,000 from the plans, despite the accountant's deficient performance. Mirabile agreed to a consent judgment requiring him to pay $374,766 in restitution and to be permanently enjoined from serving as a fiduciary to any ERISA-covered plan. The court approved the consent judgment on November 7, 2016. Kansas City Office

Perez v. Olson (D. Minn.)

On October 17, 2016, the Secretary filed a complaint against Todd Olson and Dell, Inc., the fiduciaries of the company's SIMPLE IRA Plan, alleging that from June 29, 2010 to September 30, 2014, they failed to remit $23,289.97 in employee contributions to the plan. On October 17, 2016, the parties entered a consent order and judgment requiring the defendants to restore $32,617 to the plan. The judgment also enjoined Olson from serving as a fiduciary or service provider to any ERISA-covered plan. Chicago Office

Perez v. Page (D. Mass.)

On March 11, 2016, the Secretary filed a complaint against Kenneth Page and Page Electrical Corporation, fiduciaries of the company's 401(k) Profit Sharing Plan & Trust, alleging that the fiduciaries failed to forward employee contributions to the plan. The company, which was the plan sponsor and plan administrator, is now defunct. On October 6, 2016, the court entered a consent judgment and order providing for full restitution to the plan through a fiduciary account offset of $25,230.78, and for the appointment of an independent fiduciary to administer the plan to distribute approximately $147,000.00 in plan assets to 14 active plan participants, and to terminate the plan. The consent judgment also ordered that Kenneth Page be barred from serving as a fiduciary to any ERISA-covered plan in the future. Boston Office

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Perez v. Quality Control Pattern & Model, Inc. (E.D. Pa.)

The Secretary filed a complaint on October 29, 2014 against David Braunsberg, Quality Control Pattern & Model Inc. and the company's SIMPLE IRA Plan, alleging that from July 2008 through July 2011, Braunsberg and the company failed to ensure that employee and mandatory employer contributions were remitted to the plan. The complaint seeks a judgment requiring them to restore all losses plus interest to the plan and permanently enjoining them from serving as fiduciaries or service providers to any ERISA-covered plan. The defendants failed to answer the complaint and on February 5, 2015, the clerk entered default against Braunsberg and the company. On March 10, 2015, the Secretary filed a motion for default judgment against them. The court granted the Secretary's motion for default judgment on February 19, 2016. Philadelphia Office

Perez v. Rose (E.D. Mich. and Bankr. E.D. Mich.)

On November 25, 2014, the Secretary filed a complaint against William Robin Rose and the Rose Business Forms Company, d/b/a Rose Printing Services, Inc., fiduciaries of the Rose Printing Services, Inc. Employees 401(k) Retirement Savings Plan, Employees Health Plan, and Employees Dental Plan, alleging that they failed to ensure that $20,026 in employee contributions were remitted to the plans from September 17, 2010, through August 31, 2012. In addition, from January 2, 2009, through March 16, 2012, the defendants allegedly failed to timely remit $79,606 in employee contributions to the 401(k) Plan. On August 17, 2015, the court entered a default judgment enjoining William Rose from being a fiduciary or service provider to ERISA-covered plans, appointing an independent fiduciary to terminate the 401(k) Plan, and ordering the defendants to restore all losses to the three plans. On August 20, 2015, the Secretary filed an adversary complaint in the bankruptcy court to have the amounts owed to the three plans deemed non-dischargeable in Rose's personal bankruptcy. On May 23, 2016, the bankruptcy court granted the Secretary's motion for default judgment against William Rose for failure to comply with the court order compelling discovery responses to the Secretary's interrogatories and requests for production. The court found that the $27,709.81 debt Rose owes to the three employee benefit plans is non-dischargeable. Chicago Office

Perez v. Salinas (W.D. Tex.)

On January 8, 2016, the Secretary filed a complaint against Derlis Salinas and his company, TSPA Holdings, Inc. alleging they failed to remit $17,066.78 in employee salary deferrals to the company's 401(k) Profit Sharing Plan for July 16, 2011 through May 31, 2012, and failed to collect $11,067.00 in non-discretionary safe harbor employer matching contributions for July 1, 2015 through May 31, 2012. The complaint also alleged that the fiduciaries failed to timely remit $16,730.99 in employee salary deferrals to the plan July 15, 2009 through July 15, 2011, and failed to properly administer the plan in accordance with plan documents. On July 19, 2016, the court approved the parties' consent judgment and order wherein the defendants admitted the violations and agreed to restore $30,940.14 in plan losses. Additionally, Salinas agreed to complete fiduciary training. Dallas Office

Perez v. Schrepfer (D. Colo.)

On August 6, 2015, the Secretary filed a complaint against M. Peter Schrepfer, Schrepfer Industries, Inc. 401(k), Schrepfer Industries, Inc. Health Plan, Trinidad Golf, LLC SIMPLE IRA Plan, and Trinidad Golf LLC Health Plan. The complaint alleges that Schrepfer and his companies failed to ensure that employee contributions were remitted to the plan sponsors' employee retirement and health benefits plans. On March 4, 2016, the Secretary obtained a consent judgment and order requiring Schrepfer to pay $21,500 in restitution to the participants of the two retirement plans and enjoining him from serving as a fiduciary unless and until he obtains no less than 12 hours of fiduciary education. Denver Office

Perez v. Seaboard Management, LLC (D. Md.)

On December 21, 2016, the Secretary filed a complaint against Seaboard Management, LLC, and Susan Porter and Larry Porter, owners and plan trustees, alleging that they caused the plan to make loans to their company and to another partnership under their control and that they failed to attempt to collect on these loans. Philadelphia Office

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Perez v. Sherrod (N.D. Ill.)

On April 29, 2016, the Secretary filed a complaint against Shirley Sherrod and Leroy Johnson, fiduciaries of the Shirley T. Sherrod, M.D., P.C. Target Pension Plan, alleging that, from September 2012 to the present, the fiduciaries failed to administer the plan, allocate distributions properly, and make distributions to the participants consistent with the plan documents. Chicago Office

Perez v. Sims (M.D. La.)

On February 21, 2014, the Secretary filed a complaint against Sims Insulation and Mechanical, Inc. and owner Richard Sims, alleging that they failed to remit $18,478 in employee premiums to the company's Health Plan from July 2, 2009 through April 8, 2011, and $23,230 in employee contributions to the company's SIMPLE IRA Plan from June 26, 2008 through October 14, 2011. On August 29, 2014, the Secretary filed a motion for default judgment. On January 20, 2015, the Secretary obtained a default judgment against Sims, ordering him to pay $26,921.16 in restitution to 11 SIMPLE IRA Plan participants and $21,358.24 in restitution to 20 Health Plan participants. On February 25, 2016, the Secretary filed a Rule 60 Motion for Relief. On July 24, 2016, the court granted the Secretary's motion and request for relief by amending the judgment to authorize offset of Sims' SIMPLE IRA account to restore plan losses. Dallas Office

Perez v. Smith (W.D. Pa. and Bankr. N.D. W. Va.)

On December 2, 2016, the Secretary filed a complaint against Matthew Smith and Wind Turbine Solutions, LLC, seeking approximately $45,000 in missing employee contributions to the company's Retirement Trust. Matthew Smith was the company's owner and the plan administrator and trustee. The complaint alleges that Smith failed to transfer approximately $45,000 in contributions over three years to cover operating costs for the company. On June 28, 2016, the bankruptcy court signed a consent order stating that the $45,000 in employee contributions that Smith misappropriated is a non-dischargeable debt. Philadelphia Office

Perez v. Steven Keares, Inc. (E.D. Pa.)

On September 22, 2016, the Secretary filed a complaint against Steven Keares, Inc. and its president, Harry Keares, alleging that they failed to remit $33,411 in employee contributions and $9,311 in employee loan repayments to the company's 401(k) Retirement Plan from April 27, 2012 through December 26, 2014. The lost earnings attributable to these plan assets through June 7, 2016, are $4,128. The defendants also failed to pay $111,403.29 in prevailing wage contributions to the plan from December 28, 2011 through April 18, 2014. The lost earnings on those contributions are $7,766. The total restitution sought in this case is in excess of $166,021.71 as additional lost earnings accrue. Philadelphia Office

Perez v. TapanAM Associates and Tapan Banerjee (W.D. Mo.)

On April 5, 2016, the Secretary filed a complaint against TapanAM Associates, Inc. and Tapan Banerjee, the company' sole owner and president, seeking to recover $16,022 in unremitted employee payroll withholdings for pay periods from 2010 to 2012. Defendants failed to forward employee elective deferrals for contribution to the company's SIMPLE IRA plan. Additional salary deferrals were untimely forwarded during the same period, causing $2,049 in lost earnings. Defendants failed to file an answer or other responsive pleading. On October 27, 2016, the court entered a default judgment against both defendants requiring repayment of the unremitted and delinquent employee payroll withholdings and enjoining them from violating ERISA. Kansas City Office

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Perez v. Tarry Bratton, BC, Inc. (M.D. Pa.)

On April 29, 2016, the Secretary filed a complaint against BC, Inc. and Tarry Bratton, the company's owner and plan trustee, alleging that from January 2009 to July 2012, Bratton and the company failed to remit employer contributions to the company's 401(k) Plan. The contributions were payable under prevailing wage contracts that mandated fringe benefit payments. On October 3, 2016, the court approved a dismissal of the case after the company provided documents showing that it had restored all of the approximately $249,000 in missing funds to the plan. Philadelphia Office

Perez v. The Children's Place Inc. (M.D. Fla.)

On December 30, 2014, the Secretary filed a complaint against The Children's Place Inc. and Hendrik Johannes Lamphrecht, alleging that between August 1, 2009 and May 1, 2010, they failed to remit $14,192.36 in employee premium contributions to the company's welfare benefit plan. Additionally, employee participants and their dependents incurred $13,979.13 in unpaid medical expenses and prescription drug charges after their insurance coverage lapsed due to nonpayment of premiums. On September 21, 2015, the Secretary filed a motion for default judgment against the company. On March 30, 2016, the court entered default judgment enjoining the company from violating Title I of ERISA in the future, removing the entity from any fiduciary position it held, and enjoining it from acting as a fiduciary or in other capacities to any ERISA-covered plan. On May 31, 2016, the court entered a consent judgment in which Lamphrecht agreed to pay $20,000 in restitution by August 31, 2016 and to be enjoined from serving as a fiduciary or service provider to any ERISA-covered plan in the future. The consent judgment also requires appointment of an independent fiduciary. Atlanta Office

Perez v. Watson (D. Kan.)

On April 16, 2015, the Secretary filed a complaint against Michael J. Watson, president and owner of Neely Manufacturing, alleging that Watson, as fiduciary of the company's 401(k) Retirement and Group Health Plans, was personally liable for $1,500 in lost earnings owed to participants because of untimely remittance of employer safe harbor contributions to the 401(k) Plan for 2012 and $15,699 in insurance premiums withheld from employee pay for three pay periods in 2013 after cancellation of Health Plan coverage. The court approved a consent judgment on February 10, 2016, ordering payment of $1,500 in lost earnings to the 401(k) plan participants. After Watson's admission that there were no unpaid health insurance claims and agreement to directly pay the participants, the Secretary dropped the health claim. All payments have been made. Kansas City Office

Perez v. Weinhagen (D. Minn.)

On September 27, 2016, the Secretary filed a complaint against Michael E. Weinhagen and Weinhagen Tire Co., Inc. alleging that, between February 1, 2010, and May 27, 2015, they failed to remit $29,058.14 in employee contributions to the Weinhagen Tire Co., Inc. 401(k) Plan. The complaint seeks to have all losses restored to the plan, to remove the defendants as plan fiduciaries, to enjoin them from serving as fiduciaries or service providers to any ERISA-covered plan, and to have an independent fiduciary appointed to administer the plan. Chicago Office

2. Insurance Rebates

None

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3. Miscellaneous

Perez v. City National Corporation (C.D. Cal.)

On April 24, 2015, the Secretary filed a complaint against the fiduciaries of the City National Corporation Profit Sharing Plan, alleging that from January 1, 2011 through June 1, 2012, the plan lost more than $4 million when fiduciaries engaged in self-dealing and conflicted transactions involving plan assets and caused the plan to pay excessive fees to City National Bank and its affiliates. Rather than outsource plan services to avoid potential conflicts of interest, or reimburse themselves for only direct expenses, City National and other fiduciaries established compensation rates for the plan on par with those charged to the Bank's retail clients. The compensation rate issues were compounded when Bank employees were not required to track the amount of time they spent working on plan issues. On February 26, 2016, the Secretary filed a motion for partial summary judgment, seeking a finding of liability, which was granted on April 5, 2016. The court found that City National had engaged in years of rampant self-dealing by choosing themselves to provide in-house services to their own plan in exchange for millions of dollars of unchecked, admittedly high compensation. Notably, City National never refunded any money to the plan even though their own calculations acknowledge that the plan had overpaid for City National's services. Because City National lacked contemporaneous records showing the compensation it had received from the plan, the court ordered City National to perform an accounting, with the assistance of an independent fiduciary, of all of the compensation they had received from the plan from 2006 through 2012, plus lost-opportunity costs, to be returned to the plan. On August 15, 2016, City National filed the accounting where the independent fiduciary concluded that City National had received nearly $8.2 million in compensation (plus lost- opportunity costs using the plan rate of return) or alternatively, $6.06 million in compensation (plus lost opportunity costs using the lower IRC rate of return). The Secretary and City National then filed cross motions for partial summary judgment on the issue of losses. The Secretary argued that City National was liable for all of the compensation they had received from the plan for their service provider work using the higher rate of return, less limited offsets that EBSA did not oppose during its investigation into the plan, for a total amount of $7.4 million. City National's motion argued that the plan was entitled to no damages because the plan had suffered no losses, or in the alternative, only $1.1 million, claiming that City National was entitled to various credits, including their employees' alleged work on the plan, for which City National had kept no contemporaneous records. The motions are pending. Los Angeles Office

Perez v. DSI Contracting Inc. and Burgess Baird Jr. (N.D. Ga.)

On February 3, 2014, the Secretary filed a complaint against Burgess Baird Jr., fiduciary of the DSI Contracting, Inc. Profit Sharing Plan, alleging that he caused the plan to purchase real estate contiguous to property DSI was developing, that he issued loans to participants in amounts that exceeded the amounts allowed under the plan document, and that the proceeds of the participant loans were used to invest in the property that DSI was developing. In addition, Baird issued a $490,000 loan from the plan to a real estate company, Burge Realty, LLC, which, in turn, used the loan proceeds to buy ten lots in the development. Finally, Baird failed to attempt to collect on the participant loans or the loan to Burge Realty, resulting in large losses to the plan. Once discovery was completed, the Secretary filed a motion for summary judgment. On July 24, 2015, the court granted the Secretary's motion, ordering the defendants to restore $1,381,444.78 to the plan, including lost earnings, plus any additional lost earnings accruing after September 2014. The defendants were enjoined from serving as fiduciaries to any ERISA-covered plan in the future, and a successor fiduciary was subsequently appointed by the court. The Secretary has engaged in post-judgment collection-related activity. See also Perez v. DSI Contracting Inc. and Burgess Baird Jr., H. Participant Loans. Atlanta Office

Perez v. Eye Centers of Tennessee LLC (M.D. Tenn.)

On December 31, 2014, the Secretary filed a complaint against Eye Centers of Tennessee, Raymond K. Mays, and Larry E. Patterson, alleging that the defendants improperly transferred over 90% of the assets of the company's 401(k) Profit Sharing Plan to real estate projects and used many of these projects for their own financial and personal benefit. The Secretary is seeking approximately $1.1 million in restitution, representing over $800,000 in transferred plan assets to parties in interest, transferred plan assets to defendants, and unremitted employee and employer contributions. In addition, the Secretary is seeking a permanent injunction against defendants from violating the provisions of Title I of ERISA and acting as a fiduciary, trustee, agent, or representative in any capacity to any ERISA-covered plan. The Department participated in a settlement conference with defendants on February 5, 2016. On February 18, 2016, Mays entered into a plea agreement in which he pled guilty to three counts of false statements to federal investigator, Amy Brown, and his representations on the plan's Form 5500s. As part of the plea agreement, Mays agreed to restore $800,000 to the plan on or before May 9, 2016. The Secretary filed a motion for partial summary judgment on April 29, 2016 seeking restitution of all monies to the plan with the exception of the $312,805.48 in unpaid rent due from The Pit Barbell Club. The rent due is a disputed fact between the parties' expert witnesses. The defendants responded to the Secretary's motion with approximately 1200 mostly irrelevant documents that did not demonstrate proper plan expenses. The Secretary filed a motion to exclude these documents because they were irrelevant and were not produced to the Secretary in accordance with the Federal Rules of Civil Procedure. On May 11, 2016, the defendants made a payment of $788,250.00 to the plan. On November 10, 2016, in a wholly favorable order, the court granted the Secretary's motion for summary judgment on liability, finding that the defendants violated multiple provisions of ERISA. The court also denied the defendants' renewed motion to stay proceedings. Atlanta Office

Perez. Geary Construction Inc. (D. Utah)

On October 18, 2016, the Secretary filed a complaint against Geary Construction and Deann Geary, alleging that they failed to remit employee contributions to the company's retirement plan and failed to appropriately pay claims from its self-funded health plan. On December 13, 2016, the court issued a consent judgment and order, which provides that the fiduciaries are jointly and severally liable for $22,146.07 in unremitted contributions to the retirement plan and for $285,544.08 in unpaid medical claims to the health plan. Geary is required to wind down the retirement plan by the end of 2016. After termination of the plan, defendants are permanently enjoined from future service as fiduciaries or service providers to any ERISA-covered plan. See also Perez v. Geary Construction Inc., B.1.Collection of Plan Contributions. San Francisco Office

Perez v. Kinser (W.D. Va.)

On February 26, 2014, the Secretary filed a complaint against Mark Kinser, Joyce Bennett, Unlimited Construction, Inc. and the company's Retirement Plan, alleging that on August 10, 2010, Kinser withdrew money from the plan's investment account through a check that was made payable to Kinser and Bennett as trustees of the company's Defined Benefit Plan. The complaint further alleges that Kinser and Bennett endorsed the check and on August 18, 2010, the check was deposited into a banking account in Kinser's name. The complaint seeks restitution to the plan for all losses, including lost opportunity costs, the appointment of an independent fiduciary to administer and terminate the plan, and an injunction removing the defendants as fiduciaries to the plan and permanently barring them from serving as fiduciaries to any ERISA-covered plans. Bennett filed an answer to the complaint on March 18, 2014. The United States Attorney requested that the case be stayed in order to ensure that the parallel criminal investigation is not compromised. On June 19, 2014, the Secretary filed a motion for a stay, which the court granted on August 11, 2014. The court issued an order on December 1, 2014 continuing the stay. On July 22, 2016, Kinser was sentenced to fifteen months incarceration and ordered to pay $339,986.00 in restitution to the plan following his guilty plea to one count of conversion of pension funds and one count of wire fraud. This criminal case resolved the Secretary's civil action against Kinser. On August 30, 2016, the court approved a consent judgment with Bennett, in which Bennett agreed to a permanent fiduciary bar. The Secretary dismissed the action against Kinser and the now-defunct company on September 2, 2016. Philadelphia Office

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Perez v. Leiter (C.D. Ill.)

On April 19, 2016, the Secretary filed a complaint against Thomas E. Leiter and the Leiter Group Attorneys and Counselors Professional Corporation, fiduciaries of the Leiter Group Pension Plan, for engaging in prohibited transactions. The prohibited transactions concerned improper loans of $182,000 in plan assets to three entities in which Leiter had a significant stake, and also investing $225,000 of plan assets in a condominium development in which Leiter owned a 50% interest. Chicago Office

Solis v. N.C. Caro, M.D. (N.D. Ill. and Bankr. N.D. Ill.)

On September 30, 2011, the Secretary filed a complaint in district court against Nicholas C. Caro, N.C. Caro M.D., S.C., and the company's Defined Benefit Plan. The complaint alleges that from April 27, 2006, through February 29, 2008, Caro liquidated in excess of $263,951 from the plan's investment accounts and transferred those funds to various accounts held by Caro, his wife's company, and others. The complaint seeks restoration of losses to the plan and the appointment of an independent fiduciary to distribute the assets and terminate the plan. On October 13, 2011, the Secretary filed an adversary complaint against Caro, seeking a determination that the debts to the plan are non-dischargeable. On September 25, 2012, Caro, acting pro se, filed a motion for partial summary judgment on a statute of limitations defense. The Secretary filed a cross motion on October 23, 2012. On November 29, 2012, the district court denied Caro's motion and granted the Secretary's cross motion for partial summary judgment. On November 15, 2012, Caro was criminally indicted on charges of mail fraud and embezzlement from an employee benefit plan. On December 18, 2012, the court granted Caro's motion to stay the civil proceedings because of his criminal indictment and the adversary proceeding in the bankruptcy court was stayed on April 26, 2012, because of the district court action. Both of these matters are stayed pending Caro's criminal trial. On October 29, 2015, a jury convicted Caro of all five counts in his criminal prosecution. On July 21, 2016, Caro restored $138,567 in restitution from non-bankruptcy estate assets to the clerk of the court for restitution to plan participants pursuant to a judgment entered in the criminal proceeding captioned United States of America v. Nicholas C. Caro, Case No. 12 CR 891 (N.D. Ill.). This restitution was sufficient to resolve his civil liability to the plan. On December 8, 2016, the district court entered a consent order and judgment permanently enjoining Caro from violating ERISA and permanently enjoining him from serving as a fiduciary or service provider to any ERISA-covered plan in the future. On December 14, 2016, the Secretary filed a joint motion to dismiss the adversary proceeding in the bankruptcy court. Chicago Office

Sierra Pacific Health Benefits Plan (unfiled)

On September 7, 2016, the Secretary reached a settlement with Sierra Pacific Industries and its self-funded Health Benefits Plan relating to the enforcement of the Affordable Care Act (ACA), the Department's claims regulation, and other health benefits issues. EBSA's investigation found problems with certain aspects of the plan's claims processing, with the clarity of plan documents, and with the application of certain procedures for deciding claims. The investigation also found that the plan was not a"grandfathered" plan and therefore had to comply with the ACA. As a result of the settlement, the plan agreed to readjudicate claims for preventive services consistent with the requirements of the ACA and agreed to pay claims that had been left on hold for a long time. The plan agreed to comply with the timelines for deciding claims as provided in the Department's claims regulation and to revise plan documents provided to participants to make them more readily understood by employees and applied more uniformly. Sierra Pacific also agreed to forego, for the 2017 plan year, any increases to participants' premiums, annual out-of-pocket limits, annual deductibles and coinsurance percentages in effect for the 2016 plan year. Plan Benefits Security Division

Perez v. Sulit (N.D. Ill.)

On August 26, 2015, the Secretary filed a complaint against Reginaldo Sulit, Dalisay Sulit, and Alliance Home Healthcare, Inc., and the company's Profit Sharing Plan. The complaint alleged that from May 2012 through February 2014, Reginaldo Sulit, Dalisay Sulit, and Alliance improperly transferred and distributed $1,601,908.06 in plan assets to themselves and others. In addition, the complaint alleged that the fiduciaries failed to conduct annual valuations, accountings and annual reports. On February 16, 2016, the court entered a default judgment requiring the fiduciaries to restore $1,601.908.06 in plan assets and $134,431.02 in lost opportunity costs to the plan, enjoining them from serving as a service provider or fiduciary to any ERISA-covered plan, appointing an independent fiduciary to administer and terminate the plan, and requiring the fiduciaries to pay the costs of the independent fiduciary. Chicago Office

Solis v. Tomco Auto Parts, Inc.<.u> (C.D. Cal.); Solis v. Schoenfeld (In re Schoenfeld) (Bankr. C.D. Cal.); Perez v. Schoenfeld (9th Cir.)

On January 13, 2012, the Secretary filed a complaint against Tomco Auto Parts, Inc. and Richard Alan Schoenfeld, and on January 17, 2012, the Secretary filed an adversary complaint in Schoenfeld's Chapter 13 bankruptcy. The complaints allege that, between October and November 2004, Schoenfeld, as trustee of the company's ESOP, authorized improper withdrawals of $197,000 from the ESOP, $47,000 of which was never repaid. On January 27, 2012, the Secretary filed a motion to withdraw the bankruptcy reference and to remove the action to district court. On April 25, 2012, over Schoenfeld's objection, the court removed the matter to district court. On September 17, 2012, Schoenfeld filed a motion for partial summary judgment, arguing, among other things, that he was not liable for any losses because a settlement agreement between the defunct company and a successor addressed the liability and, as a matter of law, defalcation cannot be found. On September 26, 2012, the Secretary opposed the motion, and on October 29, 2012, the court denied Schoenfeld's motion. On October 26, 2012, the Secretary filed a motion for summary judgment on all claims, and on January 31, 2012, the court granted the Secretary's motion, finding that Schoenfeld breached his fiduciary duties and committed defalcation, rendering the debt non-dischargeable. The court also imposed injunctive relief, including requiring Schoenfeld to pay all costs of an independent fiduciary to terminate the plan and distribute its assets. On February 11, 2013, Schoenfeld appealed this matter to the Ninth Circuit. Schoenfeld only appealed the court's conclusion that the judgment was non-dischargeable debt because it was a defalcation from a trust. On March 23, 2015, the Ninth Circuit remanded the case to the district court based on an intervening Supreme Court decision in Bullock (abrogating Ninth Circuit precedent and requiring certain findings in connection with the fiduciary's state of mind to find defalcation). On August 12, 2015, the district court resumed the litigation of the two cases after remand by ordering a status conference and the submission of a joint status report. On remand, funds recovered from the corporation were deemed sufficient to cover the plan's monetary loss, and so Schoenfeld was no longer liable for his monetary judgment. The Secretary argued below that injunctive relief was not similarly affected by the Ninth Circuit's decision or the monetary recovery. On November 6, 2015, the district court re-affirmed the injunctive relief as"law of the case." On December 3, 2015, Schoenfeld once again appealed to the Ninth Circuit. Schoenfeld filed his brief on June 15, 2016. The Secretary filed a response brief with record excerpts on July 15, 2016. On appeal, the Secretary argued that Schoenfeld failed to appeal the prior decision on injunctive relief, and, therefore, the court below correctly rejected Schoenfeld's belated attempts to now set aside the injunction. See also Solis v. Tomco Auto Parts, Inc.; Solis v. Schoenfeld (In re Schoenfeld); Perez v. Schoenfeld, N. Miscellaneous. Los Angeles Office and, on appeal, Plan Benefits Security Division

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Perez v. Validata Computer and Research Corp. (M.D. Ala.)

On July 29, 2015, the Secretary filed a complaint alleging that Validata Computer and Research Corporation and owner Warren Philips, as fiduciaries to the company's 401(k) Plan, allowed a series of undocumented withdrawals from the plan. All withdrawn funds were transferred to Validata's operating account. The fiduciaries also failed to diversify the plan's assets as 50% of the plan assets were loaned to Validata. Further, the plan assets were disseminated between five different banking institutions. While two of the accounts were mutual fund investments, the majority of the accounts were basic business and checking accounts. On August 16, 2016, the court entered a consent judgment permanently enjoining Philips and the company from future violations of ERISA and ordering defendants to restore the $5,500 of remaining losses directly to the three affected participants on or before August 4, 2017. Philips is also banned from serving as a fiduciary until he provides proof to the Department that he restored the money to the participants, that he took 40 hours of training on fiduciary obligations and that he took 24 hours of training on accounting principles and bookkeeping. Phillips must notify the Department before beginning service as a fiduciary again, he must continue to receive 24 hours of relevant training each year that he serves as a fiduciary, and for the next 10 years, he must send notice to the Department on January 1 affirmatively stating whether he is serving or intends to serve as a fiduciary. Atlanta Office

Perez v. Weiss (E.D.N.Y and 2d Cir.)

On January 17, 2012, the Secretary filed a complaint against Gary Weiss and the Marvin Knitting Mills, Inc. Profit Sharing Plan, alleging that Weiss unlawfully transferred and loaned $735,436.03 in plan assets to himself, his company, Marvin Knitting Mills, Inc., and a plan participant. On September 13, 2013, the court entered a default judgment against Weiss, requiring him to pay the plan the $735,436.03, plus pre-judgment interest of $166,408.58, for a total award of $901,844.61, and permanently enjoining him from serving as a fiduciary, trustee, agent, representative or service provider to any ERISA-covered plan and from violating ERISA in the future. The Secretary attempted collection activities against Weiss in the summer of 2015. In March, 2015, Weiss filed a letter with the New York district court and later a motion under Rule 60 to reopen the case on two primary bases: (1) that he never received notice of the case and decision, and (2) he had valid defenses to the claims. On November 3, 2015, the district court rejected both arguments, and on December 22, 2015, Weiss appealed to the Second Circuit. In March, 2016, the Secretary settled the monetary portion of the appeal for payment of the non-breaching participant account balances, installation of an independent fiduciary, and payment of the independent fiduciary's fee (about $107,000 in total). The court approved the order memorializing this agreement on May 13, 2016. As of June 10, 2016, the monetary sums due were received by the court-appointed independent fiduciary. In mid-July 2016, the parties reached preliminary agreement on terms of a prospective injunction. The appeal was withdrawn from the Second Circuit effective July 22, 2016. On September 2, 2016, the court approved the terms of an injunction barring Weiss from serving as a fiduciary of any plan for which he is a participant, beneficiary, or party in interest. New York Office and, on appeal, Plan Benefits Security Division

C. Financing the Union

Perez v. Monaco (N.D. Ill.)

On January 15, 2016, the Secretary filed a complaint against Anthony Monaco, National Workers Production Union Severance Trust Plan and National Workers Production Union Insurance Trust Fund. The complaint alleged that the two union plans improperly shared expenses and paid certain expenses that were not reasonable and necessary to the administration of the severance trust fund. On January 22, 2016, the Secretary filed a consent order and judgment confirming that the $63,000 in losses to the severance trust fund were restored and enjoining Monaco from servicing as a fiduciary or service provider to any ERISA-covered plan. Chicago Office

Perez v. Silva (D. Md.)

On November 16, 2015, the Secretary filed a complaint against Ricardo Silva, Charles Ezrine, Maryland Association of Correctional and Security Employees ("MACSE"), AmeriGuard Security Services, Inc., and State Employee Benefits, Inc. ("SEBI") in connection with conduct relating to the MACSE Health & Welfare and Retirement Plans, which were funded by AmeriGuard contributions. The complaint alleged that Silva, MACSE, and AmeriGuard were fiduciaries for both plans, and Ezrine and SEBI were Health Plan fiduciaries. The complaint alleges that between August 2010 and October 2013, Silva and MACSE mishandled and misappropriated Health & Welfare Plan and Retirement Plan assets, Ezrine and SEBI mishandled and misappropriated Health & Welfare Plan assets, and AmeriGuard took no steps to stop these actions. The complaint seeks restoration of plan assets, plus lost opportunity costs, and the appointment of an independent fiduciary to distribute the assets and terminate the plans. The complaint also seeks to permanently bar MACSE, Silva, Ezrine, and SEBI from serving as fiduciaries to any ERISA-covered plan. In their January 19, 2016 answer to the Secretary's complaint, AmeriGuard Security Services included a demand for a jury trial. On February 9, 2016, the Secretary filed a motion to strike this demand. The court granted the Secretary's motion on May 9, 2016. Because the Ricardo Silva and the MACSE February 9, 2016 answer was filed by Silva, not by an attorney, the judge struck the answer on Mary 9, 2016. The Secretary filed for entry of default against MACSE on May 13, 2016. On September 9, 2016, AmeriGuard filed a motion to amend its answer, seeking to add cross-claims of contribution and indemnification against the other defendants. The Secretary filed an opposition to this motion on September 27, 2016. The motion is pending. On December 2, 2016, the Secretary filed a motion for protective order seeking to quash in part two notices of deposition served by AmeriGuard, Ezrine and SEBI seeking to conduct Rule 30(b)(6) depositions of a representative of the Department. This motion is pending. Philadelphia Office

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D. Prudence of Investments

Note: For other cases involving imprudent investments, please see J. Financial Institution and Service Provider Cases.

Perez v. Bridgeport Health Care Center, Inc. and Chaim Stern (D. Conn.)

On September 8, 2016, the Secretary filed a complaint against Bridgeport Health Care Center, Inc. ("BHCC") and Chaim Stern, fiduciaries of the Bridgeport Health Care Center, Inc. Retirement Plan. The fiduciaries transferred an undetermined amount of plan assets both directly and indirectly to BHCC, Stern, and Em Kol Chai, a related entity. Between January 2011 and September 2011, the fiduciaries transferred approximately $2.6 million to Em Kol Chai without any contract or agreement related to the transfers. In October 2011, Em Kol Chai executed a Promissory Note for a $3.8 million loan from the plan without any collateral and at an interest rate of 3.25%. The promissory note also provided for a two-year extension, which Stern granted as trustee of the plan without any consideration, such as collateral or a higher interest rate. Between 2011 and 2013, the fiduciaries transferred over $3.6 million directly to Em Kol Chai. Boston Office

Perez v. Byrnes (N.D.N.Y.)

On January 26, 2015, the Secretary filed a complaint against Daniel Byrnes and Fort Orange Capital Management alleging that Byrnes invested approximately 96% of the assets of the company's Profit Sharing Plan Trust in a penny stock, with a limited public market. Prior to investing the plan assets in the company, Byrnes and his family had personally owned shares of the company. As of September 2014, Byrnes was the company's president and interim chief financial officer. The Secretary seeks both monetary and injunctive relief, including the removal of Byrnes as plan trustee and an order permanently barring him from serving as a fiduciary or service provider to any ERISA-covered plan. The Secretary engaged a valuation expert to determine the loss to the plan. The Secretary filed a summary judgment motion on June 30, 2016. The individual defendant filed his response on September 7, 2016, and the Secretary replied on October 6, 2016. New York Office

Perez v. Ditch Witch Equipment of Tennessee Inc. (E.D. Tenn.)

On April 29, 2014, the Secretary filed a complaint against Aubrey Needham and Ditch Witch Equipment of Tennessee, Inc., alleging that in 2005, Needham entered the company's Profit-Sharing Plan into a margin agreement account which allowed him to make plan investments on margin. Needham began purchasing stock warrants as plan investments, and as a result of purchases on margin, the plan's margin account had a negative balance of more than $500,000 by the end of 2005. To satisfy the margin calls, Needham liquidated other plan investments in various mutual funds. In late 2006, Needham had liquidated all of the plan's mutual fund investments and all plan assets were invested in stock warrants of a publicly traded company, Star Maritime Acquisition Corp. In April 2007, Needham liquidated the SMAC stock warrants and began purchasing stock warrants of another publicly-traded company, Health Care Acquisition Co., which became PharmAthene Inc. In August 2007, 100 percent of plan assets were invested in PharmAthene stock warrants, and plan assets remained solely invested in PharmAthene stock warrants and stock through April 2009. As a result of the plan's investments in PharmAthene, the plan suffered net losses totaling at least $359,770.91. The complaint charges Needham with failing to give appropriate consideration to whether the investments or investment course of action was reasonably designed to further the purposes of the plan and failing to take into consideration the risk of loss and the opportunity for gain (or other return) associated with the investment or investment course of action. He also failed to appropriately consider the diversification of the plan's investment portfolio, the liquidity and return of the portfolio relative to the plan's anticipated cash flow requirements, and the projected return of the portfolio relative to the plan's funding objectives. The complaint seeks an order requiring the defendants to restore all plan losses including interest, to disgorge any benefits or profits that they received as a result of fiduciary breaches, and to set off any restitution or other monetary recovery that defendants may be ordered to pay against any claims which they may have against the plan, including any claims for benefits. It also seeks the removal of defendants from their positions as plan fiduciaries and permanent injunctions barring them from serving as fiduciaries for, or having control over the assets of, any ERISA-covered plan. The Secretary engaged an expert witness and filed a motion for summary judgment on December 20, 2016. Atlanta Office

Perez v. Kennedy Fuel Co. (D. Or.)

On June 2, 2016, the Secretary filed a complaint against Kennedy Fuel Company, Inc., Barry M. Bloomberg, Gloria L. Bloomberg, and Desert Pump Co., Inc., the fiduciaries of the company's 401(k) Profit Sharing Plan, alleging that they failed to adequately diversify the plan assets and otherwise prudently invest the assets. According to the complaint, the defendants invested substantially all of the plan assets in a failed real estate investment for more than a decade, resulting in losses to the plan and the inability to pay participant benefits when due. On June 6, 2016, the court entered a consent judgment and order, requiring the fiduciaries to restore $725,347 to the plan to be distributed to ten non-fiduciary plan participants and beneficiaries. In addition, the judgment permanently barred the fiduciaries from serving as fiduciaries or service providers to any ERISA-covered plan. An independent fiduciary was appointed to collect and distribute the plan assets and to terminate the plan. Seattle Office

Perez v. Severstal Wheeling, Inc. Retirement Committee (W.D. Pa.)

On October 31, 2014, the Secretary filed a complaint alleging that from November 3, 2008 through May 19, 2009, the assets of the Wheeling Corrugating Company Retirement Security Plan and the Salaried Employees' Pension Plan of Severstal Wheeling Inc. were imprudently invested by the plans' fiduciaries, including the Severstal Wheeling, Inc. Retirement Committee - specifically committee members Michael DiClemente and Dennis Halpin - and WPN Corp. and its owner Ronald LaBow, who had been hired as the plans' investment manager. The suit also alleges that the Retirement Committee and its members failed to properly oversee the plans and monitor the actions taken by WPN and LaBow. The suit seeks to order the defendants to restore to the plans all losses and lost earnings, amounting to in excess of $7 million, caused by their fiduciary breaches and to remove the Retirement Committee as fiduciaries and appoint an independent fiduciary with authority to manage the plans. The Secretary filed motions for additional time to serve LaBow and WPN on February 25, 2015 and April 24, 2015 based on LaBow's attempts to evade service. Service was eventually effected on June 24, 2015. In March 2015, several defendants filed motions to dismiss the complaint in part. The Secretary replied to the motions and amended the complaint on March 27, 2015. The case was stayed on April 10, 2015 pending the decision of a Southern District of New York court in a related case in which the Retirement Committee had sued LaBow and WPN. The court in the related case entered a judgment in favor of the Retirement Committee in excess of $15,000,000 on August 10, 2015. LaBow and WPN have appealed that judgment. Following an August 18, 2015 status conference, the court continued the stay in the Secretary's case and scheduled a settlement conference with a magistrate judge. On September 6, 2016, the Secretary agreed to a settlement with the current members of the retirement committee covering May 1, 2009 through the present. The settlement was not filed in court. The Second Circuit Court of Appeals upheld the Southern District of New York judgment on August 30, 2016. The Secretary moved that the case be referred back to the District Court because no further settlement progress was likely with the prior retirement committee, DiClemente, and Halpin. The District Court held a scheduling conference in Pittsburgh on September 20, 2016. On October 14, 2016, the Secretary opposed the release to the prior committee of the settlement agreement with the current committee. The court ordered the settlement agreement be released to the prior committee but not shared with anyone else on November 9, 2016. The prior members of the retirement committee, DiClemente, and Halpin, filed a motion to dismiss on October 31, 2016, to which the Secretary responded on December 15, 2016. There is a private action against some of the same defendants (Labow and WPN). See also Severstal Wheeling, Inc. Retirement Committee v. WPN Corp., Section J. Financial Institution and Service Provider Cases. Philadelphia Office

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E. Preemption

Gobeille v. Liberty Mut. Ins. Co. (2d Cir. and S. Ct.)

This case involves ERISA preemption of a Vermont law that requires insurers and self-funded plans to provide the state with claims data. On July 5, 2013, the Secretary filed an amicus brief in support of the state, arguing for no preemption. Oral argument, in which the Secretary did not participate, was held on November 18, 2013. The Second Circuit issued an adverse decision on February 4, 2014. A petition for rehearing was denied on May 16, 2014. Vermont filed a certiorari petition on August 13, 2014. On December 15, 2014, the Supreme Court invited the Government's views on whether to grant certiorari. The Government filed its brief on May 19, 2015, arguing that ERISA does not preempt the state law, but urging the Court to deny certiorari. The Court nevertheless granted certiorari on June 29, 2015. Liberty Mutual filed its brief on August 28, 2015, and the Government filed its brief on September 4, 2015. The case was argued on December 2, 2015. The Supreme Court issued an unfavorable decision on March 1, 2016. In a 6-2 decision, the Court held that Vermont's reporting requirement imposed"a direct regulation of a fundamental ERISA function." The dissent agreed with Vermont and the federal government's position that neither the objectives nor the nature and effect of the burdens on plans were sufficient to trigger preemption. Plan Benefits Security Division

Gobeille v. Liberty Mut. Ins. Co. (2d Cir.)

This case involves ERISA preemption of a Vermont law that requires insurers and self-funded plans to provide the state with claims data. On July 5, 2013, the Secretary filed an amicus brief in support of the state, arguing for no preemption. Oral argument, in which the Secretary did not participate, was held November 18, 2013. The Second Circuit issued an adverse decision on February 4, 2014. A petition for rehearing was denied on May 16, 2014. Vermont filed a cert. petition on August 13, 2014. On December 15, 2014, the Supreme Court invited the government's views on whether to grant certiorari. The government filed its brief on May 19, 2015, arguing that ERISA does not preempt the state law, but urging the Court to deny certiorari. The Court nevertheless granted certiorari on June 29, 2015. Liberty Mutual filed its brief on August 28, 2015, and the government filed its brief on September 4, 2015. The case was argued on December 2, 2015. Plan Benefits Security Division

McCulloch v. United Healthcare (2d Cir.)

This appeal is from a district court decision holding that ERISA preempts a service provider's state law claim for promissory estoppel against an insurer, United Healthcare a/k/a Oxford Insurance (UHC). McCulloch Orthopedic Services is a healthcare provider without any pre-existing contractual relationship with UHC. Before McCulloch accepted a client covered by UHC, McCulloch and UHC would discuss the coverage and payment rate under the client's policy. McCulloch then provided services to the client and a claim was submitted for payment. In this case, UHC's payment differed from the payment rate UHC allegedly promised in the prior phone conversation. McCulloch sued UHC for the difference under state law. In response, UHC contended, among other things, that ERISA completely preempts the service provider's state law claim, because the client was a participant in an ERISA health plan insured by UHC. On June 8, 2015, the district court issued a decision holding that McCulloch's claim was completely preempted by ERISA based on the Second Circuit's prior decision in Montefiore Med. Ctr. v. Teamsters Local 272, 642 F.3d 321, 325 (2d Cir. 2011). McCulloch appealed the decision. The Secretary filed an amicus brief in support of McCulloch on October 22, 2015. The brief argues that McCulloch's state law claim is not preempted because the claim turns on the oral communications between UHC and McCulloch and does not turn on the ERISA plan terms. It also argues that Montefiore is distinguishable because the provider in that case had a contractual arrangement with the plan and the insurer, which governs all communications between the insurer, plan and the provider. The brief also noted that the district court's decision is directly contrary to at least two circuit decisions. On March 23, 2016, the parties voluntarily withdrew the appeal before oral argument was heard. Plan Benefits Security Division

Southwest Regional Council of Carpenters v. McCarron (C.D. Cal.)

This case concerns a trustee of a Taft-Hartley plan who was also a trustee of the plan's affiliated union. After the Department's investigation into the plan, the Department issued a voluntary compliance letter, indicating a violation associated with the rental agreement between the plan and the union. The Department found that the union charged above-market rates to the plan in violation of ERISA's prohibited transaction provisions. In response, the defendant-trustee then unilaterally decided to return the alleged overpayment to the plan from union funds. The union then sued the trustee for a labor law violation because he had failed to get the official approval from the other trustees. The defendant-trustee lost the case, was declared liable for the overpayment amounts, and then filed a third-party complaint against the plan under state law for unjust enrichment. The plan filed a motion to dismiss the complaint, arguing, in part, the claim was preempted by ERISA. The district court judge requested the Department's views on two issues related to the motion to dismiss, one of which concerned ERISA: whether the third-party state law claims are preempted by ERISA. In coordination with several divisions in the Department, the Department of Justice filed a statement of interest with the district court on March 30, 2016 on both the ERISA issue and the other labor law issue. On the ERISA issue, the Secretary concluded that the claims were preempted. On May 16, 2016, the district court issued its ruling, agreeing with the Secretary's preemption analysis and granted the plan's motion to dismiss. Plan Benefits Security Division

F. Participants' Rights and Remedies

Fletcher v. Convergex (2d Cir.)

This case concerns a purported class action on behalf of a number of ERISA defined benefit plans that claim that they were double charged by a company that provided securities brokerage and transition management services to the plans, which funneled trade orders to an offshore subsidiary in Bermuda. Because the company diverted small amounts from their many clients, which included many ERISA plans, the amounts involved for each plan were small. Thus, the named plan representative was only double billed for $1,500. The district court held that the loss of $1500 by a large ERISA defined benefit pension plan did not significantly increase the risk of default, even though the plan was significantly underfunded, and consequently, the court held that the plaintiff participants lacked Article III standing to bring the suit. The plaintiffs appealed, and the Secretary filed a brief on June 27, 2016, arguing that under Second Circuit and Supreme Court case law, a fiduciary breach is sufficient as an injury-in-fact, and the participants can also represent the plan for its financial injury, even if the injury is small. Oral argument, in which the Secretary participated, was held on December 12, 2016. Plan Benefits Security Division

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Hitchcock v. Cumberland University (6th Cir.)

This case concerns Cumberland University employees who alleged the University failed to provide a promised employer match for their pension contributions and then retroactively amended the plan to eliminate the promised match. The employees contend that the plan amendment violated ERISA's anti-cutback protections. The district court dismissed the claim, concluding that administrative exhaustion was required for the anti-cutback claims and that these were just claims for benefits. The plaintiffs appealed. In support of the plaintiffs, the Secretary filed an amicus curiae brief on September 2, 2016. The Secretary argued that administrative exhaustion is not required for anti-cutback claims, because these claims are statutory claims that concern the employer's promised funding for the plan. The Secretary also argued that the anti-cutback claims are not disguised benefit claims, because they alleged a fiduciary breach in administrating the plan pursuant to an illegal amendment. Plan Benefits Security Division

Montanile v. Bd. of Trustees of the Nat'l Elevator Indus. Health Benefits Plan (S. Ct.)

On March 30, 2015, the Supreme Court granted certiorari in this private ERISA subrogation/reimbursement case. The question presented was whether a fiduciary can recover amounts paid by a health care plan for medical benefits from a participant who obtains a third-party tort recovery where the participant does not still have possession of the funds. The Government filed an amicus brief supporting the petitioner and arguing that, under Supreme Court precedent, the plan cannot recover such funds from a participant's general assets. The case was argued on November 9, 2015. On January 20, 2016, the Court issued a favorable 8-1 decision agreeing with the Government's position that the plan cannot recover funds through a subrogation against a participant's general assets. Plan Benefits Security Division

Osberg v. Foot Locker (2d Cir.)

This class action challenging a company's conversion of its defined benefit plan to a cash balance plan is on appeal for a second time to the Second Circuit. In the prior appeal from a grant of summary judgment to Foot Locker, the Second Circuit reversed in part, based on its conclusion that the reformation remedy that the class sought did not require a showing of actual harm. On remand, the district court certified a class, held a bench trial and found in favor of the class, ordering Foot Locker to pay $180,000,000. The court concluded that the company had provided plan participants with false and misleading descriptions of the plan's wear-away provision in SPDs and elsewhere. ("Wear-away" provisions apply to the conversion of benefits from an old to a new pension plan. If benefits in an old plan exceed the benefits in a new plan, the participant will not accrue new benefits until the level of benefits under the new plan catches up with or"wears away" the accrued benefits under the old plan.) The court also found that the statute of limitations had not run for any of the class members based on the"fraud or concealment" exception to ERISA's statute of limitations. Foot Locker appealed, arguing, among other things, that ERISA's three-year statute of limitations turns on constructive notice and that, because there is no basis for concluding that every class member shared the same mistaken understanding of the wear-away provision, the court erred in ordering reformation for an entire class. Foot Locker filed its brief on February 16, 2016, the plaintiffs filed their response brief on May 17, 2016, and Secretary filed a supporting amicus brief on May 24, 2016. The Secretary's brief contends that the district court correctly applied the statute of limitations provision, that plaintiffs need not show detrimental reliance to establish fiduciary misrepresentation, and that a class could be certified without showing individualized mistake. Plan Benefits Security Division

Solnin v. Sun Life (2d Cir.)

This case concerns a long-running dispute related to a long-term disability benefits claim. Solnin was denied long-term disability benefits by her insurer, Sun Life. Solnin then appealed this denial in federal court. On March 23, 2007, the district court issued an order concluding that Sun Life's denial of Solnin's claim was arbitrary and capricious because Sun Life had considered only Solnin's medical limitations and not whether she was vocationally qualified to obtain any employment. The court then remanded the matter to Sun Life, instructing it to consider both Solnin's physical capability and her vocational qualifications. The court did not specify any timeline within which the review must be completed. On remand, Sun Life requested more information from Solnin, and Solnin provided more information. However, Sun Life was not satisfied and refused to render a decision. On July 10, 2008, Solnin filed suit in the district court, 475 days after the district court's order and 184 days after Solnin requested that Sun Life issue a decision. Back in the district court, the Sun Life contended that Solnin's claim should be dismissed for a failure to exhaust administrative procedures, but Solnin argued that Sun Life did not act in a timely fashion consistent with the claims regulations, 29 C.F.R. Section 2560.503-1(h), so her claim should be"deemed denied" as a matter of law. The district court agreed with Solnin and granted her benefits. The issue presented on appeal was whether the time limits of the claims regulation apply on remands for purposes of the deemed denied provisions. Sun Life filed its opening brief on March 3, 2016, and the plaintiff's response brief was filed on June 2, 2016. The Secretary filed a supporting brief on June 11, 2016, arguing that a remanded claim should generally be treated as a claim on appeal under the claims regulations, and the time limits in the claims regulation for deciding appeals of claims denials should apply, generally running from the date of the remand order. Oral argument, in which the Secretary participated, was held on December 12, 2016. Plan Benefits Security Division

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Thole v. U.S. Bank (8th Cir.)

This case concerns constitutional standing for plan participants who seek to represent their underfunded defined benefit pension plans. The plaintiffs sued the fiduciaries for failing to diversify their plan and for improperly taking fees for their services. They allege that their violations contributed to the plan's underfunding. After surviving a motion to dismiss, the plan sponsor contributed to the plan and erased the deficit in funding. The district court in Minnesota issued an order dismissing the case based on mootness, concluding that the decision by the defendants to fully fund their plan eliminated any injury. The plaintiffs appealed. The defendants' response brief argued an alternative ground for affirmance based on the plaintiffs' lack of constitutional standing when the lawsuit was filed and when the plan was underfunded. In response to this argument, the Secretary submitted a motion to file an amicus curiae brief out-of-time on October 19, 2016 and attached the Secretary's proposed amicus curiae brief. The Secretary argued that plan participants sustained constitutional injury when the fiduciary acts contributed to their plan's underfunding and the plan's inability to deliver promised benefits. The defendants filed an opposition to the motion, and the Court deferred its decision to accept the brief to the merits panel that will hear the case. Plan Benefits Security Division

Van Loo v. Church's (6th Cir.)

This case concerns the remedies available to participants for fiduciary misrepresentations. A district court in Michigan held that Church's Chicken, the plan sponsor and administrator for an ERISA-covered life insurance plan, breached its fiduciary duty of loyalty by accepting premiums from a plan participant without mailing to her an insurability form requiring proof of good health. After the participant died, the insurer denied her beneficiary's claim based on the failure to complete and submit the form. Based on its conclusion that Church's was a fiduciary and breached its duties, the court entered judgment against Church's in the amount of the elected supplemental coverage. The appellant's brief was filed on Sept. 13, 2016, the plaintiff-appellee's brief was filed on November 23, 2016, and the Secretary's brief was filed on November 30, 2016. The appellant Church's Chicken argued that the remedy was improper because the plaintiff failed to establish detrimental reliance. The Secretary disagreed, and argued that the district court's monetary judgment against Church's Chicken was proper, because detrimental reliance is not required for surcharge remedies against fiduciaries, and, in any event, detrimental reliance was satisfied, because lost opportunity costs and non-economic harm can justify the remedy in this case. Plan Benefits Security Division

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G. Section 510

Perez v. Scott Brain (C.D. Cal. and 9th Cir.)

On May 21, 2014, the Secretary filed a retaliation complaint under section 510 of ERISA, alleging that the trustees and administrator of several Southern California Cement Masons Union pension and welfare funds terminated a fund employee, Cheryle Robbins, because she cooperated with an EBSA investigator who was investigating Scott Brain, president of the local and one of the funds' trustees and also because she participated in a complaint to the union's international leadership, alleging that Brain was engaging in several schemes resulting in underpayment to the funds and which, if true, would violate ERISA. On June 30, 2014, the Secretary amended the complaint to name Melissa Cook and her law firm, Melissa W. Cook & Associates, as defendants. Cook was counsel to the trust funds and was also Brain's romantic partner from at least May 2013 through at least March 2014, although she never disclosed this conflict to the other trustees. The complaint alleges that Cook stepped outside her role as counsel to effect the removal of Robbins in an effort to protect Brain and that the Cook defendants knowingly participated in ERISA violations. On August 26, 2014, the Cook defendants filed a motion to dismiss. On January 30, 2015, the court denied the motion, adopting the Secretary's position that: (1) there is no statute of limitations applicable to claims brought by the Secretary under ERISA section 510; (2) the Secretary's demand for back pay is not futile; (3) informal, internal complaints are protected under ERISA section 510; (4) the decision to outsource the work of the whistleblower's department was an adverse action; (5) the attorney to the trust funds may be held liable for knowingly participating in the trustees' violations of ERISA; (6) ERISA section 510 applies to"any person," including an attorney to the trust funds; and (7) California law does not immunize an attorney from liability under ERISA sections 404 and 510. The court also permitted the Secretary to file a second amended complaint, which varies from the first in three ways. First, relief is sought from the individual trustees who voted to outsource Robbins' department. Second, it added one additional trustee who participated in such vote. Third, relief is sought from certain defendants for the terminations of Louise Bansmer and Cory Rice (mother and son), who allegedly were terminated by the trust funds' administrator in violation of section 510 for their participation in making internal ERISA-protected complaints and refusing requests by Brain to change contribution rates and because she continued to speak to Robbins while Robbins was on administrative leave. On August 25, 2015, the court entered a partial consent judgment resolving the case against all defendants except two trustees, including Scott Brain, and Melissa Cook and her firm. It provides for $630,000 in back pay and other damages to the three whistleblowers as well as critical injunctive relief, requiring the trustee defendants to make a statement that Robbins's termination was unlawful and calling for Brain's resignation as trustee. On August 6, 2015, the court ruled that the Secretary's communications with the whistleblowers are protected by the common interest doctrine. This order was the result of the Secretary's emergency motion for protective order filed after the Secretary's attorneys were forced to suspend the deposition of a whistleblower because defense counsel refused to stop asking questions about the whistleblower's communications with the Department. On December 14, 2015, the Secretary presented oral argument against defendants' motions for summary judgment. The two remaining trustee defendants sought summary judgment primarily on grounds that they could not be liable for actions taken by votes of the trust funds' full board of trustees or third-party administrator. The Secretary argued that material evidence disputes these asserted facts, showing the trustee defendants' participation in certain votes and influence on other trustees and the funds' administrator in connection with all of the relevant retaliatory votes and actions. The Secretary further contended that Melissa Cook conspired with one of the remaining trustee defendants to retaliate, arguing that the co-conspirator exception to hearsay, FRE 801(d)(2)(E), allows the court to impute to her trustee co-conspirator the funds' attorney's statements planning retaliation against the whistleblowers. On January 8, 2016, the court denied Cook's motion and denied Brain and Briceno's motions in part. The court granted summary judgment to Brain and Briceno with regard to their liability under section 510 for the third-party administrator's failure to rehire Robbins after her department was dissolved. The Secretary moved for reconsideration of the court's ruling with regard to Brain. As discussed below, the Secretary's motion was granted following trial. Following a trial on May 17-24, 2016, the court issued an order on July 25, 2016, finding that Brain and Cook violated section 510 by retaliating against Robbins for her participation in a DOL investigation and in an internal complaint about Brain and retaliating against Rice for his participation in the internal complaint about Brain The decision established that section 510 violations warrant fiduciary and service provider bars; that such violations constitute breaches of fiduciary duties; that section 510 protects complaints to internal personnel; that the"cat's paw" theory of liability applies and can reach individual defendants; and that attorneys are not immune from liability under ERISA's anti-retaliation provision. In finding Brain liable for retaliation against Robbins, the court granted the Secretary's motion for reconsideration of the court's grant of summary judgment to Brain. In September of 2016, Brain filed a motion to stay the injunction pending appeal. The court denied his motion, but granted a stay of 30 days to permit Brain to seek a stay from the Ninth Circuit. On October 4, 2016, Brain filed a motion for reconsideration of his motion for stay, complaining that the court's judgment was harming his reputation and hurting his chances of reelection as Business Manager of his union. The Ninth Circuit denied that motion as well. On October 14, 2016, the Secretary obtained a final order and permanent injunction memorializing the relief that the Secretary won in July. The injunction removed Brain as trustee to the funds and barred him from serving in any fiduciary capacity, including but not limited to serving as a trustee, to the plans. Brain was also required to give notice of the injunction to all fund participants and beneficiaries and prior to accepting any position as fiduciary to any other ERISA-covered plans. The order also enjoined Cook and her law firm from providing services to the funds, required them to disgorge all of the fees received in connection with the retaliation, and required them to provide notice of the injunction to all owners, officers, directors, affiliates, subsidiaries, employees, and agents of the firm. On October 14, 2016, and October 17, 2016, Brain and Cook filed separate notices of appeal from the district court's decision. On October 17, 2016, Brain filed a motion for stay in the Ninth Circuit. On October 26, 2016, the Secretary filed a response arguing against the stay. The Ninth Circuit denied the stay request on November 8, 2016. Los Angeles Office and, on appeal, Plan Benefits Security Division

Trujillo v. Landmark Media (4th Cir.)

This case concerns a pro se claim under ERISA section 510 alleging retaliation for reporting ERISA violations during a plan audit. The plaintiff alleges that he instigated and participated in an internal audit and alerted the plan to problems with its procedures on vesting. The plaintiff was subsequently fired. The district court dismissed the plaintiff's claims on a motion to dismiss, concluding that the Fourth Circuit does not read section 510 to protect internal complaints. On March 10, 2016, the plaintiff appealed the district court's dismissal. The Secretary filed an amicus brief on May 6, 2016, supporting the plaintiff and arguing that any complaints about violations during internal plan audits are protected by section 510. Plan Benefits Security Division

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H. Participant Loans

Note: For cases involving failure to forward participant loan repayments to plans, see section B.1.Collection of Plan Contributions and Loan Repayments.

Perez v. DSI Contracting Inc. and Burgess Baird Jr. (N.D. Ga.)

On February 3, 2014, the Secretary filed a complaint against Burgess Baird Jr., fiduciary of the DSI Contracting, Inc. Profit Sharing Plan, alleging that he caused the plan to purchase real estate contiguous to property DSI was developing, that he issued loans to participants in amounts that exceeded the amounts allowed under the plan document, and that the proceeds of the participant loans were used to invest in the property that DSI was developing. In addition, Baird issued a $490,000 loan from the plan to a real estate company, Burge Realty, LLC, which, in turn, used the loan proceeds to buy ten lots in the development. Finally, Baird failed to attempt to collect on the participant loans or the loan to Burge Realty, resulting in large losses to the plan. Once discovery was completed, the Secretary filed a motion for summary judgment. On July 24, 2015, the court granted the Secretary's motion, ordering the defendants to restore $1,381,444.78 to the plan, including lost earnings, plus any additional lost earnings accruing after September 2014. The defendants were enjoined from serving as fiduciaries to any ERISA-covered plan in the future, and a successor fiduciary was subsequently appointed by the court. The Secretary has engaged in post-judgment collection-related activity. See also Perez v. DSI Contracting Inc. and Burgess Baird Jr., B.3. Miscellaneous. Atlanta Office

I. MEWAs

Perez v. Distribution by Datagen Inc. f/k/a Depawix Health Resources Inc. (N.D. Ga.)

On February 14, 2014, the Secretary filed a complaint against Distribution by Datagen, Inc. f/k/a Depawix Health Resources, Inc., and several companies and individuals involved in the imprudent marketing and operation of a multiple employer welfare arrangement. Other defendants include Smart Services, Inc. f/k/a Peck and Peck, Inc., based in Atlanta, Georgia, BeneSmart, Inc., based in Stone Mountain, Georgia, and Gallagher Health Studies, Inc., Inspired by Coconut, Inc., and Green Gables Artisan's Cooperative, Inc., based in Jacksonville, Florida. Individual fiduciary defendants include Michael Purr, Ann Marie Purr, Grant Lockhart, Marlin Brett Dixon, Cheryl L. Clinton, and Christopher Peck. The complaint alleges that defendants ffered part-time"employment" with Gallagher Health Studies, consisting primarily of participating in an annual health assessment and communicating with a patient advocate regarding the participant's health care, for prospective participants in Datagen's self-insured health plan. The defendants also offered an additional part-time"employment" arrangement with Inspired by Coconut and Green Gables Artisan's Cooperative for participants who incurred more than $1,500 in medical expenses in a four-week period; those participants typically paid premiums of several hundred dollars per month for coverage. The additional part-time"employment" arrangement purportedly required participants to produce hand-crafted items; however, participants could pay additional sums to have the work outsourced. After deducting premiums from participants' accounts over several months, defendants failed to remit funds to the third-party administrator (TPA) and to insurance companies, resulting in about $250,000 in unpaid medical claims. The complaint alleges that defendants misled participants by affirmatively promoting the Datagen Plan as sound and viable, while aware that TPA services and insurance coverage were being terminated for non-payment and health plan claims were unfunded. In August 2015, the Department obtained consent orders with Clinton, Dixon, Purr, and Lockhart permanently enjoining them from violating ERISA, requiring them to complete 24 hours of fiduciary education prior to assuming any fiduciary obligations imposed by ERISA, and securing their cooperation with the Secretary's prosecution of the lawsuit. On December 1, 2015, the Secretary filed a motion for summary judgment against Purr and Peck, and Peck filed a response on January 3, 2016. Purr also filed a summary judgment motion and the Department filed its response to that motion on December 21, 2015. Oral arguments on the cross-motions were held on March 16, 2016. The court granted the Secretary's motion for summary judgment on liability, denied defendants' cross motions, and rejected defendants' statute of limitations defense. The court found that both Purr and Peck breached their fiduciary duties by (1) causing participants' medical claims to go unpaid, (2) failing to properly remit funds to the third party administrator for processing, and (3) misleading participants regarding the financial stability of plan accounts. The court ordered additional briefing on losses and permanent injunctive relief, as well as the names of three possible independent fiduciaries. The court determined that"[w]hile the plaintiff has shown losses to the Datagen Plan, Plaintiff has not identified which losses were caused by the defendants' breaches." The court held that this matter must proceed to a jury trial on the issue of damages and ordered the Secretary to (1) discuss, with authority, which party has the burden of proof at trial to prove that defendants' breaches caused the losses identified by plaintiff (and perhaps by the independent fiduciary); (2) submit a proposal for the appointment of an independent fiduciary and detail how this special master is to be compensated; (3) provide authority allowing such an appointment and submit the names and addresses of three persons who could serve as independent fiduciary; and (4) provide authority for the imposition of a permanent injunction against an ERISA fiduciary along with a proposed permanent injunction. On May 13, 2016, the Secretary briefed all of these issues. On July 1, 2016, the court entered an order stating,"Due to the litigious nature of this suit, and because the defendants seem more interested in disputing the court's ruling on summary judgment than proposing a feasible path to final resolution, the court finds it necessary to espouse a rigid plan moving this case forward." The court will appoint a successor fiduciary, choosing from one of the three individuals the Department recommended and will then proceed with a bench trial (realizing that a jury trial as previously ordered is not appropriate under ERISA) on losses. The court removed the defendants as fiduciaries and appointed an independent fiduciary. At the Secretary's and Peck's suggestion, the court ordered mediation and assigned the case to a federal magistrate judge for settlement purposes. Atlanta Office

Perez v. Doyle (D.N.J. and 3d Cir.)

On April 28, 2005, the Secretary filed a complaint involving the Professional Industrial & Trade Workers Union (PITWU) Health and Welfare Fund, a MEWA. The Secretary alleged that James Doyle, who marketed the plan's health benefits, diverted employer contributions paid to the plan's trust for non-plan purposes, including for his own commission and fees, and that Cynthia Holloway, as a trustee, failed to institute any proper administration of funds despite clear indications of diversion. The fund collapsed with more than $7 million of unpaid health claims. Following a bench trial in 2009, one defendant, Mark Maccariella, a co-trustee, entered into a consent order in which he agreed to be enjoined from serving as a fiduciary or service provider for any ERISA-covered plan and to restore more than $195,000 to the plan. On June 30, 2010, the district court granted judgment in favor of Doyle and Holloway, finding that the Secretary failed to conclusively establish that the plan was underfunded or that the marketing fees were unreasonable. The Secretary filed an appeal on August 27, 2010, with an opening brief filed on December 13, 2010 and a reply on March 4, 2011. The Secretary argued that the district court erred in holding that Holloway, as trustee, did not breach her duties when the evidence showed that she failed to prudently manage the trust fund and did nothing to prevent the diversion of its assets, and that there was substantial evidence, which the district court failed to address, that Doyle was a fiduciary in that he controlled plan assets and that the fees he forwarded from plan assets were unreasonable. The Third Circuit heard oral argument on April 27, 2011. The Secretary received a favorable decision on March 27, 2011, vacating the decision and remanding for further proceedings. On January 8, 2015, the district court issued a post-remand decision against the defendants, holding Holloway and Doyle liable for diverting over $4.6 million and $3.8 million of plan assets, respectively, in the form of bogus union dues and unnecessary sales commissions. The defendants appealed once more to the Third Circuit. The Secretary filed a response on September 3, 2015 arguing that the paid employer contributions were plan assets, that Doyle is a functional fiduciary based on his control and discretion over the billing and receipt of the paid employer contributions, and that they had both breached multiple fiduciary duties in failing to protect these plan assets from diversion. Oral argument, in which the Secretary participated, was held on January 21, 2016. On August 18, 2016, the Third Circuit issued a mostly favorable decision upholding the functional fiduciary status of the appealing defendants. The Third Circuit rejected Doyle's arguments and affirmed in full the lower court's judgment against Doyle. The court also rejected Holloway's arguments that the contributions were not plan assets, but remanded to have the district court make findings as to when Holloway's liability for plan losses arose. The Third Circuit found that Holloway could not simply be held liable for losses starting on the date of her installation as a fiduciary; liability could only attach when sufficient"red flags" (the Third Circuit's phrase) put her on notice. The district court judge issued an"Order on Mandate" re-entering the case on the district court docket on November 3, 2016. New York Office and, on appeal, Plan Benefits Security Division

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Secretary v. Koresko (3d Cir.)

This is a fiduciary breach case involving the diversion of assets from a MEWA death benefit arrangement. While the case was ongoing in the district court, Koresko and other defendants filed multiple appeals, a motion to stay and a mandamus action. Ultimately, the Secretary was successful in getting all of the appeals dismissed as interlocutory, except the appeal from the order prohibiting the defendants from acting as plan fiduciaries or service providers and appointing an independent fiduciary. Eventually, after numerous extensions, Koresko filed his opening brief on May 28, 2014, and the Secretary filed a response brief on June 27, 2014, arguing that the court of appeals should uphold the district court's order. On March 6, 2015, the appeal was submitted to a panel without oral argument. Meanwhile, the district court held a three-day bench trial in June 2014. By decisions issued in February and March 2015, the district court made the injunctions permanent and held Koresko liable for $38 million in plan losses. On April 24, 2015, the district court granted the Secretary's and U.S. Trustee's motion to dismiss six pending Koresko-related bankruptcy petitions with prejudice, finding that the bankruptcy process had been used as a means to impede the Department of Labor's prosecution against the Koresko defendants rather than to benefit the beneficiaries. On July 21, 2015, the district court issued an order appointing a forensic accountant responsible for conducting, at the defendants' expense, an equitable accounting of the assets of the trusts at issue, with a sub-accounting of each plan's interest in the trust. On August 4, 2015, the district court issued an order appointing a new independent fiduciary and ordering Koresko to pay for the associated costs at the end of the appointment. Koresko appealed the merits decision, and filed a brief on September 23, 2015, to which the Secretary responded on November 9, 2015. Koresko also appealed the August 4 order appointing an independent fiduciary, and the court ordered the appeals consolidated and asked for additional briefing on the issues relating to the order. The parties submitted letter briefing on these issues. On April 5, 2016, the Third Circuit affirmed in full the judgment against Koresko without holding oral argument. In subsequent proceedings, the Court ordered Koresko to turn over property and assets to the Trust pursuant to the judgment. Koresko did not comply, and the Court jailed Koresko for contempt. Koresko challenged the order of contempt but was denied relief. On October 15, 2016, Koresko appealed that denial. Philadelphia Office and, on appeal, Plan Benefits Security Division

Harris v. Sommet Group (M.D. Tenn.)

On July 5, 2013, the Secretary filed a complaint against Sommet Group LLC, Edwin Todd and Brian Whitfield. This is a health plan case with almost $3 million in unpaid claims. The Justice Department has filed indictments against the three plan fiduciaries, alleging that they committed wire fraud, embezzlement, and money laundering. The FBI investigation revealed that the fiduciaries had purposely enticed participating employers by establishing artificially low contribution rates. It also revealed that Sommet had attempted to deflect its participating employers' suspicions by assuring them that the company was simply experiencing routine banking problems and that payments would be processed in time. Sommet's assets were frozen. Based on a request by the Justice Department, the Secretary filed a motion to stay the civil case, which was granted. The criminal action was completed during 2014. The Secretary filed a motion to lift the stay of the civil case, which the court granted on December 18, 2014. On September 3, 2015, the court approved a consent judgment and order permanently enjoining Todd from serving as a fiduciary. On April 7, 2016, the Secretary filed a motion for default, including information on the status of Whitfield's military service (there is none, at least not currently). On April 25, 2016, the clerk entered default against Whitfield. On May 19, 2016, the Secretary filed a proposed default judgment and order. On July 14, 2016, the court entered a default judgment against Whitfield, permanently enjoining him from violating Title I of ERISA and from serving as a fiduciary or in any capacity to an ERISA-covered plan. Atlanta Office

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J. Financial Institution and Service Provider Cases

Perez v. Belanger (E.D. Pa.)

On August 15, 2016, the Secretary filed a complaint against A. Kenneth Belanger, Jo-Ann Belanger, and Belanger and Company alleging that, in their capacity as professional retirement plan administrators, they violated ERISA with respect to many of the plans they served. The defendants' improper actions include transferring some plan assets to the company's accounts without the knowledge and authorization of the clients, failing to transfer employee contributions and loan repayments to some plan accounts in a timely fashion, and charging some of the plans fees without informing their clients or reporting said fees on the Form 5500. The Secretary seeks restoration of approximately $67,600.00 plus lost opportunity costs to the plans and an injunction barring the defendants from serving as fiduciaries or service providers to ERISA-covered plans. On November 7, 2016, the defendants filed a partial motion to dismiss, to which the Secretary filed an opposition on December 12, 2016. This motion is pending. Philadelphia Office

Perez v. Chimes District of Columbia, Inc. (D. Md.)

On October 30, 2015, the Secretary filed a complaint against Chimes District of Columbia, Inc., FCE Benefits Administrators, Inc. ("FCE"), Benefits Consulting Group ("BCG"), and other related defendants alleging that the Chimes D.C. Health & Welfare Plan paid millions of dollars in excessive fees for plan services and that FCE and BCG, the plan's service providers, caused the plan to engage in a number of transactions for their benefit or knowingly participated in such transactions. Among other things, the complaint alleges that Chimes DC officers Albert Bussone and Martin Lampner solicited FCE and BCG to make donations to the Chimes Foundation, the fundraising entity of Chimes International and its other subsidiaries (including Chimes DC). In 2009 and thereafter, FCE and BCG jointly pledged at least $330,000 to the Chimes Foundation and did so in connection with their continued retention as plan service providers. Between 2009 and 2014, FCE paid at least $400,000, and BCG paid at least $282,500, to the Chimes Foundation in connection with their engagement as plan service providers. The complaint also alleges that the Chimes defendants failed to diligently seek alternative service providers for the plan, that FCE improperly used its authority over the plan to cause other service providers to make payments to FCE, and that the claims administration and other services FCE provided to the plan were inadequate. In 2016, the court denied motions to dismiss filed by all of the defendants. Philadelphia and Arlington Offices

In re First Farmers Financial Litigation (N.D. Ill.)

This is a private action against parties involved in fraudulent loans that injured many investors, including ERISA plans. The loans were purportedly originated by First Farmers Financial, LLC ("FFF"), a USDA-approved"non-traditional" lender, from 2012 to 2014, and were represented to be mostly guaranteed by the USDA. In fact, the loans were a sham. FFF's principal was arrested and plead guilty to criminal fraud charges. A receiver has been appointed to recover assets for the benefit of injured investors, including ERISA plans. In that action, counsel for Pennant Management, Inc., sought $1.8 million of attorney fees from the amounts recovered to date in the action. Pennant purchased interests in the fraudulent loans, sold them to investors, and recommended them for an investment vehicle in which ERISA plans invested. The appointed receiver and the Secretary objected to the fee application, arguing that Pennant's counsel is limited to the retainer agreement it has with Pennant, which agreement requires Pennant to pay its counsel's fees. On December 15, 2015, the court denied the fee application in part, allowing Pennant's counsel to be paid some fees from the receiver's estate for work it completed as special counsel at the receiver's direction. On July 27, 2016, the Secretary filed a proof of claim against the FFF estate on behalf of ERISA plans that invested in investment products impaired by the fraudulent loans. The Secretary also asserted a claim of contingent liability if FFF knowingly participated in any fiduciary breaches that may have been committed by Pennant Management, Inc., Salem Trust Company, or GreatBanc Trust Company, three affiliated companies that served as either trustee or investment advisor to the investment products or as trustee to the ERISA plans. On December 13, 2016, the receiver filed an objection, arguing that the Secretary's proof of claim was duplicative of the investment products' claims. The receiver argued that the ERISA plans that invested in the investment products are not direct claimants of the FFF estate and that the investment products are the direct claimants that would receive any distributions. Chicago Office and Plan Benefits Security Division

Solis v. Hutcheson (D. Idaho)

On May 15, 2012, the Secretary filed a complaint along with a motion for a temporary restraining order and a preliminary injunction, seeking removal of Matthew D. Hutcheson and his firm, Hutcheson Walker Advisors LLC, and the appointment of an independent fiduciary to take control of plan assets currently under the control of an entity called the Retirement Security Plan & Trust (RSPT). On May 16, 2012, the court entered the temporary restraining order. On June 13, 2012, the court issued a preliminary injunction, granting the Secretary's request to continue the appointment of the independent fiduciary over RSPT and the removal of Hutcheson through the pendency of the litigation. Hutcheson was criminally convicted on April 15, 2013. The Ninth Circuit affirmed his conviction on May 15, 2015 and denied rehearing on July 9, 2015. On March 29, 2016, the Secretary dismissed the suit as to two now-defunct corporate defendants, Hutcheson Walker Advisors LLC and Green Valley Holdings LLC. On March 29, 2016, the Secretary filed a motion for summary judgment and permanent injunction against Hutcheson, seeking to have him removed from his role at RSPT and permanently barring him from acting as a fiduciary for any ERISA-covered plan. Hutcheson filed his opposition to the summary judgment motion on June 29, 2016. On July 11, 2016, Hutcheson filed a motion for declaratory judgment, seeking, among other things, to have the Secretary's claims against him declared to be invalid; the Secretary filed a response on August 4, 2016. On July 22, 2016, Hutcheson filed a motion requesting an evidentiary hearing on whether he violated ERISA; the Secretary filed an opposition on August 15, 2016. On December 16, 2016, the court denied Hutcheson's motion for declaratory relief, granted the Secretary's summary judgment motion, and entered a final judgment against Hutcheson in favor of the Secretary. The independent fiduciary continues to pursue claims on behalf of the plan and has made monthly activity and expense reports to the Secretary and the district court. Plan Benefits Security Division

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Perez v. Invesco Trust Company (unfiled)

On April 26, 2016, the Secretary and Invesco Trust Company entered into a settlement agreement in which Invesco agreed to pay $10.275 million to certain plan investors, a civil penalty of $1.027 million and to make additional disclosures to plan clients. Invesco operated the Invesco Short-Term Investment Fund, a multi-billion dollar collective fund composed of ERISA plan assets. The Department contended that Invesco violated ERISA when it undertook a series of measures to ensure that the ISTIF continued to trade at $1 although the fund's net asset value had fallen below $1 due to losses in the value of the fund's securities holdings. One measure Invesco took was having an affiliate enter into a series of support agreements to provide contingent financial support to the ISTIF without adequately informing the fund's investors. Invesco also retained a portion of the income earned by the ISTIF to increase the fund's net asset value instead of distributing that income to investors. Retaining a portion of the ISTIF's income not only reduced distributions to investors, but also reduced the obligations of Invesco's affiliate under the support agreements. In addition to restoring plans' losses resulting from the ISTIF's retention of income, Invesco agreed to regularly disclose to ERISA plan investors the ISTIF's holdings, its actual market value, and the existence of any supporting measures used to bolster the ISTIF's net asset value. Atlanta Office and Plan Benefits Security Division

Kelley v. Fidelity (1st Cir.)

This case involves float income retained by Fidelity, as trustee for pension plans, for itself and other customers on money derived from the sale of mutual fund shares owned by the plans following a participant's redemption request. The district court held that Fidelity was entitled to the income and was not acting as a fiduciary with regard to the income. The Secretary filed an amicus brief on September 21, 2015, supporting the plaintiffs and arguing that Fidelity was not entitled to the float income and was acting as a fiduciary in making the distributions. Oral argument, in which the Secretary participated, was held on March 8, 2016. On July 13, 2016, the First Circuit issued its decision, holding that the float, which was earned after Fidelity cashed out a participant's mutual fund shares but before it actually made the distribution to the participant, was not a plan asset, and on that basis affirmed the district court's decision. The court concluded that the plaintiffs had waived the argument that the Secretary made as amicus, i.e., that because the float was not disclosed or agreed to, Fidelity violated ERISA by using it for non-plan purposes. The court did not resolve the issue but instead reserved it for resolution in a future case that presents the issue. Plan Benefits Security Division

Perez v. MagnaCare Administrative Services, LLC. (S.D.N.Y.)

On September 30, 2016, the Secretary filed a complaint against MagnaCare Administrative Services, LLC and MagnaCare, LLC (collectively,"MagnaCare"), providers of third-party administrative services, including claims adjudication, for ERISA-covered plans. The complaint alleges that MagnaCare set its own compensation and failed to disclose the compensation to the plans. Specifically, in addition to charging a per-employee monthly fee, which was disclosed, MagnaCare charged the plans an undisclosed markup over and above the actual amounts paid by MagnaCare to the providers of ancillary medical services such as laboratories and standalone radiology and imaging services. This markup, which MagnaCare called a"Network Management Fee," was hidden in the overall charges for ancillary medical services MagnaCare submitted to the plans. The complaint also alleged that MagnaCare failed to comply with the requirements of the Affordable Care Act when adjudicating emergency services claims. The complaint further alleged that MagnaCare violated ERISA and the Secretary's claims procedures regulation when administering claims for which a third party might be responsible. On October 3, 2016, the Secretary and defendants submitted a proposed consent order which would require MagnaCare to (a) pay at least $14.5 million to health plans as repayment of undisclosed fees, with possible additional payments totaling $4.5 million by 2019, (b) provide detailed fee disclosures, (c) reform its claims adjudication practices, (d) change the way that it adjudicates emergency services claims and fully comply with the Affordable Care Act when adjudicating emergency services claims, and (e) offer to readjudicate emergency services and certain other health benefits claims that were denied. Plan Benefits Security Division

McCaffree v. Principal Life Ins. Co. (8th Cir.)

In December 2014, a district court granted Principal's motion to dismiss the case alleging that it charged excessive and undisclosed fees for managing separate investment accounts for a pension plan. The district court relied on the Seventh Circuit's decision in Leimkeuhler to conclude that Principal was not acting as an ERISA fiduciary with regard to the fees. The plaintiff appealed, and the Secretary filed an amicus brief on April 8, 2015, arguing that Principal was a fiduciary under the facts alleged in light of its authority over investment options and fees. Oral argument, in which the Secretary participated, was held on September 21, 2015. On January 8, 2016, the Eighth Circuit issued an opinion affirming the dismissal. The court rejected McCaffree's excessive fee claims on two main grounds: (1) Principal was not acting as a fiduciary at the time the fees and expenses were initially negotiated, and so owed no fiduciary duty to ensure that the negotiated fees were reasonable; and (2) McCaffree failed to adequately allege a connection or nexus between any subsequent fiduciary duty that Principal owed (after the service contracts were signed) and the excessive fee allegations. Plan Benefits Security Division

Perez v. Ramsay (W.D.N.Y.)

On December 29, 2014, the Secretary filed a complaint against Roger Ramsay, an investment advisor to ERISA Plans, and Compensation Planning Corp. of Rochester, Inc., a third party administrator. The complaint alleges that from at least 2006 through 2011, defendants received undisclosed and unauthorized compensation, failed to offset fees received against fees the plans would otherwise have had to pay, and Ramsay failed to advise plans to move assets to a lower fee fund class with the same investment portfolio. Discovery closed in April 2016. The case has been stayed to permit the parties to explore settlement. New York Office

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Solis v. Results One (N.D. Ill. and 7th Cir.)

On March 8, 2011, the Secretary filed a complaint against Results One Financial, LLC, a firm that provided investment management services to employee benefit plans, and Steven Salutric, an owner and director of the company, seeking restoration of approximately $1.2 million in losses to the accounts of five ERISA plans. The complaint alleges that between March 2005 and September 2009, the defendants impermissibly used plan assets for the benefit of six entities related to Salutric. In January 2010, the U.S. Securities and Exchange Commission sued Results One for violating the Investment Advisors Act. As a result of that litigation, control of Results One was placed in the hands of a court-appointed receiver. In December 2011, the Department of Justice indicted Salutric for embezzling plan assets. On June 5, 2012, the court entered a default judgment against Salutric, requiring him to restore $1.2 million in losses to the plans. On September 17, 2012, the court entered a consent judgment requiring Results One to restore $850,000 in losses to the plan. On May 9, 2013, the Supreme Auto Plan filed a motion to intervene and/or vacate the consent judgment. On June 14, 2013, the Secretary filed a memorandum in opposition to the motion. On March 26, 2014, the court declined Supreme Auto Plan's motion. On April 25, 2014, Supreme Auto appealed the matter to the Seventh Circuit. On June 2, 2014, September 6, 2014, and January 29, 2015, Supreme Auto Plan, the Secretary and the Seventh Circuit representative met for settlement discussions. On October 17, 2016, defendants moved to voluntarily dismiss the appeal. The court issued an order on the same day dismissing the appeal. Chicago Office and, on appeal, Plan Benefits Security Division

Severstal Wheeling, Inc. Retirement Committee v. WPN Corp. (2d Cir.)

This case involves the fiduciaries' failure to diversify their pension plans' holdings, causing $15 million in losses. On August 10, 2015, the district court for the Southern District of New York issued a ruling against all defendant fiduciaries for failing to diversify and manage investments for two pension plans. Two of the defendants were Ronald Labow and his company, WPN, the investment manager for the plans. Labow and WPN appealed to the Second Circuit, arguing that they were not fiduciaries. The Secretary filed an amicus brief on March 15, 2016, arguing that they were both fiduciaries in view of their authority over plan investments and their service to the plans as their investment manager. Oral argument, in which the Secretary participated, was held on August 17, 2016. On August 30, 2016, the Second Circuit issued a favorable decision, summarily affirming the ruling of the lower court in favor of the plaintiffs. The Second Circuit found that the defendants were fiduciaries as investment managers because they provided investment advice for a fee and because they received a grant of discretionary authority over plan administration. The Philadelphia Regional Solicitor's Office has an enforcement action against the same defendants. See also Perez v. Severstal Wheeling, Inc. Retirement Committee, Section D. Prudence of Investments. Plan Benefits Security Division

State Street Bank and Trust Company Foreign Exchange Case Settlement (unfiled)

On July 26, 2016, the Secretary executed a settlement with State Street Bank and Trust Company regarding its foreign exchange pricing practices, as they affected its ERISA-covered plan clients. Over a long period, State Street failed to disclose its markup in foreign exchange transactions, made misrepresentations to its plan clients concerning its fees in relation to foreign exchange transactions, and failed to meet the conditions of the statutory exemption in ERISA that covered the transactions. The settlement is part of a global resolution of investigations conducted by the Department of Labor (DOL), the Department of Justice (DOJ), and the Securities and Exchange Commission (SEC), and of private class action lawsuits filed in the U.S. District Court for the District of Massachusetts. The DOL settlement includes a $60 million payment to ERISA plans that were custody clients of State Street between 1998 and 2009, a component of a $300 million overall class action settlement that was filed in the district court on July 26, 2016. State Street also will pay penalties of $155 million to the DOJ and $75 million to the SEC. ERISA penalties will be deemed satisfied through payment of the DOJ penalty. State Street has now instituted corrective measures regarding its pricing practices disclosures and affirms in the DOL settlement that it will continue implementation of such measures in the future. On November 2, 2016, the district court approved the related settlement in the private class action suits. Boston Office

K. Orphan Plans

Perez v. Astro Communications 401(k) Plan (S.D.N.Y.)

On March 24, 2016, the Secretary filed a complaint to secure distribution of about $13,800 due three plan participants. The Secretary applied for the clerk's entry of default on July 26, 2016 and received the entry on August 25, 2016. The Secretary applied to the court for an order appointing an independent fiduciary on September 1, 2016. New York Office

Perez v. Atilano Cordero Badillo and the Empresas A. Cordero Badillo Retirement Plan (W.D. Pa.)

On May 7, 2015 the Secretary filed this case involving an abandoned plan with over $128,000 in assets. In addition to an independent fiduciary, the Secretary's complaint seeks payment of the independent fiduciary's costs by the previous trustee, whom the Secretary alleges abandoned the plan for a prolonged period of time to the detriment of participants. On July 7, 2015, the defendants filed a motion seeking an extension of 30 days to file an answer and a stay of this action in favor the plan sponsor's pending Chapter 7 corporate bankruptcy liquidation case. On July 16, 2015, the Secretary filed an opposition to these applications in view of (1) the prolonged efforts by the Department to get voluntary plan asset distribution (2) the police powers exception to bankruptcy stays and (3) clear statutory and case authority exempting plans and plan assets from the debtor's estate. The defendants filed a response on August 7, 2015, alleging abuse of process and automatic stay violations. The Secretary filed a reply, with leave of the court, on August 14, 2015. That same day, the court denied the defendants' applications for dismissal, stay, and sanctions, and ordered an answer to be filed on August 17, 2015. The defendants filed a motion to dismiss for lack of subject matter jurisdiction; the Secretary filed the opposition on August 21, 2015. On March 1, 2016, the court issued a decision and order denying the defendants' motion to dismiss and indicating its expectation that the Secretary will file a motion for summary judgment. That same day, the defendant filed an interlocutory appeal to the First Circuit. Because this is not a final, appealable order, the First Circuit issued an order to the defendants to show cause as to why the Court has appellate jurisdiction over this interlocutory appeal. The defendants filed a brief in response. On December 19, 2016, the First Circuit dismissed the appeal for lack of appellate jurisdiction and ordered a remand to the district court. See also Perez v. Atilano Cordero Badillo and the Empresas A. Cordero Badillo Retirement Plan, Section M. Bankruptcy. New York Office

Perez v. Authorized Factory Service, Inc. (W.D. Pa.)

On December 9, 2016, the Secretary filed a complaint alleging that Authorized Factory Service, Inc. failed to take fiduciary responsibility for the operation and administration of its 401(k) plan and failed to appoint anyone to assume that responsibility. Since the company ceased operations in 2002, participants have not been able to obtain distribution of their retirement assets. The complaint seeks the appointment of an independent fiduciary to terminate the plan and distribute the assets. Philadelphia Office

Perez v. Carolina Steel & Stone Inc. (W.D.N.C.)

On December 23, 2014, the Secretary filed a complaint against Timothy W. Davis and Carolina Steel and Stone Inc., alleging that during 2008, 2009, and 2010, they failed to remit employee contributions and failed to collect and remit matching employer contributions to the company's 401(k) retirement plan. The defendants voluntarily restored missing contributions with lost earnings to the plan, but they failed to direct the plan's custodian regarding allocation of the missing funds to participant accounts. They also stopped administering the plan, leaving plan participants unable to secure their retirement benefits. On July 27, 2015, the court entered a consent judgment and order. The asset custodian confirmed that it allocated the funds from the trust account to the participants based on information from Davis. Davis contracted with a consultant, who initiated plan termination activities with the custodian, located all but two plan participants, represented that he will establish IRAs for the two participants he has been unable to contact, and provided documentation necessary to prove plan termination. Atlanta Office

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Perez v. Coffman (E.D. Wis.)

On November 23, 2015, the Secretary filed a complaint against Gregory Coffman and Downey, Inc., fiduciaries of the Downey, Inc. Profit Sharing Plan, alleging that they failed to terminate the plan and distribute $35,665.90 to 20 plan participants. On December 9, 2016, the court entered a default judgment removing the defendants as fiduciaries to the plan, appointing an independent fiduciary to terminate the plan, and ordering that the defendants cooperate with and pay the cost of the independent fiduciary. See also Perez v. Coffman, Section B.1.Collection of Plan Contributions and Loan Repayments. Chicago Office

Perez v. Community Care, Inc. 403(b) Retirement Plan (S.D. Iowa)

On December 2, 2015, the Secretary filed a complaint against the Community Care, Inc. (CCI) 403(b) Retirement Plan. The Secretary alleges that the plan was abandoned, leaving at least 290 participants unable to access their accounts containing more than $630,000 in plan assets when the company shut down in May 2014. On April 12, 2016, the court granted the Secretary's motion for default judgment, appointing an independent fiduciary to handle distributions and termination of the plan. Kansas City Office

Secretary v. DeLaGarza (E.D. Mich.)

On August 26, 2016, the Secretary filed a complaint against Christina Samone DeLaGarza and Mariah Industries, Inc. for failing to administer the company's 401(k) Plan since September 2012 when Mariah ceased operations. Participants have been unable to obtain distributions from their vested account balances. The complaint seeks to remove DeLaGarza and Mariah Industries as fiduciaries to the plan and to permanently enjoin them from serving as fiduciaries or service providers to any ERISA-covered plan. It also seeks to have an independent fiduciary appointed to administer the plan, distribute $14,000 in plan assets to eligible participants, and terminate the plan. Chicago Office

Perez v. Encorium Group, Inc. (E.D. Pa.)

On September 29, 2015, the Secretary filed a complaint seeking the appointment of an independent fiduciary to complete the termination and distribution of the Encorium Group, Inc. 401(k) Profit Sharing Plan & Trust. Encorium ceased operations in or around October 2009 but failed to complete the termination of the plan and distribute its assets. The plan has approximately 33 participants and over $966,000 in assets. A former officer of Encorium agreed to accept service of the complaint and to enter into a consent judgment for the appointment of an independent fiduciary to distribute the plan assets. The Secretary filed the consent order on February 29, 2016, and the court entered it on March 7, 2016. Philadelphia Office

Perez v. Ethos Healthcare, Inc. 401(k) Plan (W.D. Tex.)

On September 29, 2015, the Secretary filed a complaint against the Ethos Healthcare, Inc. 401(k) Plan, seeking the appointment of an independent fiduciary to administer the plan, which was abandoned by its original fiduciaries. As of July 14, 2015, the plan had $39,180.27 in total assets and 19 participants. In response to the Secretary's motion to dismiss, the court dismissed the action without prejudice on March 16, 2016. The Secretary sought the dismissal after locating the plan trustee and obtaining her cooperation in facilitating termination of the plan and the distribution of plan assets to the participants. Dallas Office

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Perez v. Greater Columbia OB-GYN P.A. (D.S.C.)

On June 2, 2016, the Secretary filed a complaint, seeking the appointment of an independent fiduciary for the purpose of terminating the Greater Columbia OB-GYN P.A. Profit Sharing Plan and distributing the plan assets. Dr. Susan Keeshan served as the plan trustee and acted as plan administrator. The company ceased operations soon after Keeshan's death on June 25, 2013, leaving the plan abandoned with no active fiduciary. As a result, plan participants were unable to secure their retirement benefits. At the time of Keeshan's death, the plan had approximately 10 participants with about $108,000 in total assets. On June 13, 2016, the court approved the consent judgment and order appointing a successor fiduciary. Atlanta Office

Perez v. Homestead Physicians Inc. (S.D. Fla.)

On September 16, 2016, the Secretary filed a complaint seeking the appointment of an independent fiduciary to the Homestead Physicians P.A. 401(k) Plan to replace the company and Lorn Leitman, who owned Homestead and served as the plan trustee. On September 14, 2010, Homestead dissolved administratively and ceased operations later that month. At that time, Leitman began facilitating distributions to terminated participants. He failed, however, to ensure that terminated participants received all plan distributions. As of December 31, 2012, one participant remained in the plan with an account balance of more than $91,000. In an unrelated civil case brought by the Secretary, the court order filed on October 9, 2013, permanently barred Leitman from serving as a fiduciary to any employee benefits plan. Atlanta Office

Perez v. Horizon NR, LLC (E.D. Ky.)

On March 7, 2016, the Secretary filed a complaint against Horizon NR, LLC, Lance Sogan, and the company's Employee Savings Plan and Trust, alleging that the company abandoned the plan. On July 11, 2016, the court entered a default judgment against the company and the plan, ordering the appointment of an independent fiduciary. On July 26, 2016, the court entered a consent order and judgment removing Sogan as an authorized signer for the plan, which had 144 participant accounts and $2,296,818 in plan assets as of September 28, 2015. Cleveland Office

Perez v. Interactive Marketing Group 401(k) Plan (D.N.J.)

On April 11, 2016, the Secretary filed a complaint to secure distribution of about $753,000 to 11 participants. After serving the plan and not receiving an answer, the Secretary requested and obtained entry of default from the clerk of the court on August 12, 2016. On September 8, 2016, the Secretary submitted an application for the appointment of an independent fiduciary. New York Office

Perez v. Island Organics Profit Sharing Plan (D.N.J.)

On April 26, 2016, the Secretary filed a complaint seeking distribution of plan assets to 29 participants. The Secretary's investigators located the missing fiduciary and persuaded him to sign a consent order appointing an independent fiduciary, which the court approved on August 4, 2016. New York Office

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Perez v. Joyce Klindt, MD Plan f/b/o Joan Davis (E.D.N.Y.)

On March 9, 2016, the Secretary filed a complaint to secure an independent fiduciary for this plan covering one participant entitled to $106,000 in plan assets. On June 3, 2016, the Secretary applied to the clerk for entry of default after the plan was served and failed to answer. The clerk entered default on June 13, 2016. The Secretary applied to the court for an order appointing an independent fiduciary. On October 18, 2016, the court issued a memorandum decision explaining why the Secretary was entitled to the relief sought and entered a judgment and order appointing the independent fiduciary on October 19, 2016. New York Office

Perez v. Kesco Southeast Inc. (N.D. Ga.)

On May 2, 2016, the Department filed a complaint against Kesco Southeast, Inc., plan administrator and sponsor of the company's 401(k) Plan, Dean Conn, president and sole owner of Kesco, and corporate secretary Andrea Rozelle. In May 2013, Rozelle authorized the plan's fund custodian to make lump sum distributions of all plan assets with two checks. The first check was for the benefit of an individual participant in the amount of $14,545.83. The check was signed by the participant and deposited into his account. The second check, for the remaining $20,228.36 balance in the plan account, was payable to the company and deposited into an account belonging to and controlled by Conn. As a result, the plan's assets were depleted, and the plan is unable to make distributions to the remaining 19 participants with outstanding balances, excluding Rozelle. The complaint seeks restitution, permanent injunctions barring the fiduciaries from violating ERISA and from serving as fiduciaries to any ERISA-covered plan, and the appointment of an independent fiduciary. Atlanta Office

Perez v. Lily Pond Nursing Home Savings Plan (E.D.N.Y.)

On March 24, 2016, the Secretary filed a complaint to secure distribution of about $129,000 to seven participants. After the plan was served but did not answer, the Secretary requested clerk's entry of default, which was received on July 27, 2016. On August 10, 2016, the Secretary applied to the court for the appointment of an independent fiduciary. New York Office

Perez v. Mueller (D. Minn.)

On April 26, 2016, the Secretary filed a complaint against Lori Jo Mueller for failing to administer the Edelweiss 401(k) Plan since 2012. The company ceased operations in September 2012 after it was discovered Mueller embezzled money from the company for personal use. Mueller plead guilty to defrauding her employer in February 2013. In June 2013, she was sentenced to 51 months in prison for one count of wire fraud and one count of health care fraud. On December 29, 2016, the parties agreed on the principal terms of a consent order and judgment, which would remove Mueller as a fiduciary to the plan, permanently enjoin her from serving as a fiduciary or service provider to any ERISA-covered plan in the future and appoint an independent fiduciary to administer the plan, distribute $12,276 in plan assets to four eligible participants, and terminate the plan. Chicago Office

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Perez v. Philadelphia Committee for the Prevention of Blindness (E.D. Pa.)

On March 4, 2016, the Secretary filed a complaint against the Philadelphia Committee for the Prevention of Blindness, seeking the appointment of an independent fiduciary to oversee the termination of the Committee's Annuities Plan and distribute funds to plan participants. The Committee had gone out of business in approximately 1982, and the individual who had been appointed to oversee the plan died in 2012. On November 17, 2016, the court approved a default judgment appointing an independent fiduciary. Philadelphia Office

Perez v. Sanchez (N.D. Ga.)

On July 2, 2015, the Secretary filed a complaint against Rik Sanchez and Ants Software, Inc., the fiduciaries of the company's 401(k) plan, alleging that in May 2013, Sanchez used his plan administrative login information to access plan participants' profile information and changed each participant's address to that of the corporate defendant. He also changed the plan's bank account to a new one controlled by him. The complaint further alleged that Sanchez requested the third party administrator of the plan to transfer plan management and plan assets to a company named Renowned Holdings, Inc., an entity controlled by Sanchez. The third party administrator refused. Thereafter, Sanchez stopped administering the plan, leaving participants unable to receive information about their plan funds or gain access to their plan benefits. At that time, the plan had approximately 76 participants and approximately $1,383,875 in assets. The Secretary filed a motion for default judgment against Sanchez, requesting the appointment of an independent fiduciary for the plan. On January 8, 2016, the court granted the Secretary's motion and entered default judgment against Sanchez. The order appoints an independent fiduciary to administer the plan, permanently enjoins the defendants from engaging in any further violation of ERISA, and permanently bars them from serving as a fiduciary to any ERISA-covered plan. Atlanta Office

Perez v. Spartan Roofing Company, Inc. (W.D. Mich.)

On October 23, 2014, the Secretary filed a complaint against Spartan Roofing Company, Inc. alleging that the company abandoned its profit sharing plan. The fiduciary of the plan and owner of the company died, leaving no one to administer the plan. On March 11, 2015, the Secretary moved for entry of default judgment, which was entered on April 21, 2015. The judgment appointed an independent fiduciary to distribute approximately $400,000 in plan assets to 13 participants. On August 22, 2016, the Secretary moved for an amendment to the default judgment, identifying how plan assets would be disbursed. On August 24, 2016, the court granted the Secretary's motion. Cleveland Office

Perez v. Tapscott (D. Colo.)

On March 14, 2016, the Secretary filed a complaint against Robert Tapscott, who owned the Tapscott Group, sponsor of a 401(K) Plan. The company ceased operations in 1998 but failed to terminate the plan, preventing participants from accessing the plan. The Secretary seeks appointment of a replacement trustee to terminate the plan and authorize the distribution of funds to plan participants. Denver Office

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Perez v. The Scanlan Agency (E.D. Pa.)

On November 28, 2016, the Secretary filed a complaint seeking the appointment of an independent fiduciary to complete the termination and distribution of the Scanlan Agency, Inc. 401(k) plan. Plan trustees resigned in October 2011 after the company ceased operations in the first quarter of 2011. The company failed to complete the termination of the plan and distribute its assets. The plan has approximately seven participants and over $100,000 in assets. On January 26, 2017, the court approved a consent judgment removing the defendant from its position as a fiduciary with respect to the plan and appointing an independent fiduciary to distribute plan assets and to terminate the plan. Philadelphia Office

Perez v. Wright (D. Minn.)

On January 12, 2015, the Secretary filed a complaint against Kenneth W. Wright for failing to terminate the Schoolstart Company 401(k) P/S Plan and issue distributions. As of September 14, 2015, the abandoned plan had $15,495.92 in plan assets and five participants. On November 6, 2015, the Secretary filed a motion for default judgment. On January 20, 2016, the court granted the Secretary's motion for default judgment, removing Wright as a fiduciary to the plan, permanently enjoining him from serving as fiduciary or service provider to any ERISA-covered plan, and appointing an independent fiduciary to administer the plan, distribute its assets, and terminate the plan. The judgment also ordered Wright to pay the independent fiduciary's fees and expenses, which totaled $2,000.00. Chicago Office

L. Contempt and Subpoena Enforcement

Perez v. Business Administrators Consultants, Inc. (S.D. Ohio)

On November 16, 2016, the Secretary filed a petition to compel Business Administrators Consultants, Inc. to respond to a subpoena duces tecum issued by the Department on May 19, 2016. Cleveland Office

Perez v. Futhey (W.D. Tenn.)

On January 28, 2016, the Secretary filed a petition to compel Malcolm Futhey to respond to a subpoena duces tecum issued by the Department on July 23, 2015. In response, Futhey provided a responsive document, and by agreement of the parties, the court dismissed the petition on July 29, 2016. Cleveland Office

Solis v. Kineticsware, Inc. (W.D. Wash.); Solis v. Sampson (In re Sampson) (Bankr. W.D. Wash.)

Throughout 2015 and 2016, the court continued to hold regular status conferences in an attempt to increase the amounts paid by Sampson to the Kineticsware, Inc. 401(k) Plan pursuant to previous court orders. In June 2016, Sampson increased his monthly payment. Barnett, who is jointly and severally liable, presented updated financial statements in April 2016, and the Department calculated, according to an agreed-upon formula, an updated increased monthly payment that he is now required to pay. On February 4, 2014, the Secretary filed a petition for civil contempt and a request for an order to show cause because Sampson was nearly one year delinquent under the terms of his payment plan. On June 13, 2014, the court ordered Sampson to pay at least $750 per month toward the judgment, ordered him to consider a stock pledge, and reminded Sampson that penalties could be imposed on him if he fails to make the required payments. The Secretary first filed a petition for civil contempt against Sampson on February 28, 2013, because Sampson was similarly significantly delinquent, but withdrew it following Sampson's tender of approximately $11,000 that was past due. The Secretary's district court complaint, filed on November 15, 2010 against Kineticsware, Inc., Jeffrey Sampson and Richard Barnett, alleged that they failed to collect and remit to the company's 401(k) Plan $222,316 in employer contributions for plan years 2007-2008. The Secretary had filed an adversary complaint on October 26, 2009 in Sampson's Chapter 7 bankruptcy case, seeking a determination that his debt to the plan is non-dischargeable. On January 9, 2012, the court entered a consent judgment, finding that Sampson and Barnett are jointly and severally liable for $200,610 in losses due non-fiduciary participants, permanently enjoining them from future fiduciary service to any ERISA-covered plan, and requiring them to pay for the costs of an independent fiduciary to administer the plan. See also Solis v. Kineticsware, Inc., Solis v. Sampson (In re Sampson), B.1.Collection of Plan Contributions and Loan Repayments. Seattle Office

Perez v. Travelers Insurance Company, Inc. (S.D.N.Y.)

On January 5, 2016, the Secretary filed a subpoena enforcement action against the Travelers Insurance Company, seeking production of certain documents relating to its issuance of fidelity bonds under ERISA section 412. On February 18, 2016, the Secretary reached an agreement with Travelers resolving the enforcement action and resulting in acceptable document production. New York Office

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Perez v. United Associates Lighting Corp. (W.D.N.C.)

On October 14, 2015, the Secretary filed a petition to enforce a subpoena to obtain SIMPLE IRA Plan documents from United Associates Lighting Corp. and Roscoe Wagoner, after the defendants failed to provide documents in response to a subpoena requiring the production of documents. After the petition was filed and the respondents were served with notice of a hearing, the defendants failed to attend the hearing. As a result, on December 8, 2015, the court issued an order of civil contempt, ordering the respondents to pay a fine of $100 per day until they provide the documents, providing that if the defendants fail to comply by January 1, 2016, the court will incarcerate them until they purge themselves of contempt, and requiring that the defendants pay the Secretary's attorney fees totaling $1,400. In January 2016, after respondents failed to comply, the Secretary filed a notice of continued contempt. As the court did not act on this notice, the Secretary filed a second notice of continued contempt and a request for equitable tolling in July 2016. The Department is working with the IRS to obtain the relevant information regarding employee wages and withholdings. Atlanta Office

M. Bankruptcy

Note: This section includes cases focusing on bankruptcy issues; where an adversarial complaint to determine the non-dischargeability of debt is incidental to a complaint involving other issues, please see the appropriate case discussion.

Perez v. Atilano Cordero Badillo and the Empresas A. Cordero Badillo Retirement Plan (D.P.R.)

On May 7, 2015, the Secretary filed this case involving an abandoned plan with over $128,000 in assets. In addition to an independent fiduciary, the Secretary's complaint seeks payment of the independent fiduciary's costs by the previous trustee, whom the Secretary alleges abandoned the plan for a prolonged period of time to the detriment of participants. On July 7, 2015, the defendants filed a motion seeking (1) an extension of 30 days to file an answer and (2) a stay of this action in favor the plan sponsor's pending Chapter 7 corporate bankruptcy liquidation case. On July 16, 2015, the Secretary filed an opposition to these applications in view of (1) the prolonged efforts by the Department to get voluntary plan asset distribution (2) the police powers exception to bankruptcy stays and (3) clear statutory and case authority exempting plans and plan assets from the debtor's estate. The defendants filed a response on August 7, 2015 alleging abuse of process and automatic stay violations. The Secretary filed a reply (with leave of the court) on August 14, 2015. That same day, the court denied the defendants' applications for dismissal, stay, and sanctions, and ordered an answer to be filed on August 17, 2015. The defendants filed a motion to dismiss for lack of subject matter jurisdiction; the Secretary filed the opposition on August 21, 2015. On March 1, 2016, the court issued a decision and order denying the defendants' motion to dismiss and indicating its expectation that the Secretary will file a motion for summary judgment. That same day, the defendant filed an interlocutory appeal to the First Circuit. Because this is not a final, appealable order, the First Circuit issued an order to the defendants to show cause as to why the Court has appellate jurisdiction over this interlocutory appeal. The defendants filed a brief in response. On December 19, 2016, the First Circuit dismissed the appeal for lack of appellate jurisdiction and ordered a remand to the district court. See also Perez v. Atilano Cordero Badillo and the Empresas A. Cordero Badillo Retirement Plan, Section K. Orphan Plans. New York Office

Perez v. Black (Bankr. D. Conn.)

On August 2, 2016, the Secretary filed a complaint to determine the dischargeability of the debt in the personal bankruptcy of James Black, the fiduciary responsible for the Whitney Management and Maintenance SIMPLE IRA Plan. For the period from January 1, 2013 through May, 2014, $12,071.00 was withheld from employee paychecks but not transmitted to the plan. Black personally handled the payroll, withholding the funds, and made the decision to divert such funds for other than plan purposes. On October 18, 2016, the bankruptcy court granted the Secretary's motion to enter a stipulation and order determining that $12,071.00 in employee contributions owed to the plan constituted a non-dischargeable debt. The stipulation and order also requires that the debtor enter into a consent judgment establishing a payment plan to restore the unpaid contributions to the employees' individual accounts. Boston Office

Perez v. Bowman (Bankr. D.N.J.)

On June 13, 2016, the Secretary filed an adversary complaint to establish non-dischargeability of a debt under the Bankruptcy Code's fiduciary defalcation exception to discharge. William Bowman, the fiduciary, had an obligation to restore approximately $140,000 to the William Bowman Associates, Inc. Profit Sharing 401(k) Plan under a consent judgment that the Secretary filed in March 2013 in Harris v. Bowman. The bankruptcy court issued a discharge order for Bowman without providing creditors with an opportunity to object. The New Jersey U.S. Attorney's Office obtained a consent order from Bowman, extending the time to object to discharge until July 22, 2016. On August 31, 2016, the Secretary submitted a consent order, which the court approved on September 1, 2016, affirming the debt as non-dischargeable. New York Office

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Solis v. Harris (D. Minn.); Perez v. Harris (In re Harris) (Bankr. D. Minn.)

After the district court judgment was issued in this case, defendant Michael Harris filed for Chapter 7 bankruptcy on November 23, 2015. The Secretary filed an adversary action on February 26, 2016, arguing against discharge of the specific debt of the district court judgment for $67,839 because the debt was incurred when Harris committed defalcation while acting in a fiduciary capacity. Cross motions for summary judgment were filed on June 30, 2016, and summary judgment was granted to the Secretary following oral argument on July 19, 2016. Kansas City Office

Perez v. Harris (8th Cir. BAP)

This case, before the Eighth Circuit's Bankruptcy Appellate Panel (BAP), concerns the Secretary's collection of a judgment against a breaching fiduciary in bankruptcy. In 2012, the Chicago Office filed a complaint against Harris, who, as CEO, misused his employees' contributions to their health plan for corporate expenses. In 2015, the Chicago Office won in the district court after a bench trial, obtaining a judgment that Harris had violated his fiduciary duties and was liable for $67,839.60. Harris did not appeal the judgment but filed for bankruptcy in an attempt to discharge the judgment debt. In bankruptcy court, the Kansas City Office filed an adversary action asserting that the debt is not dischargeable. The bankruptcy court agreed with the Secretary and concluded that the debt was not dischargeable. The defendant then appealed to the Eighth Circuit's BAP. In his appeal, the defendant argued that he was not a fiduciary for purposes of the bankruptcy code and did not have the requisite intent for defalcation. Harris filed his brief on August 31, 2016. The Secretary filed a response brief on September 30, 2016. Oral argument, in which the Secretary participated, was held on December 8, 2016. Chicago Office, Kansas City Office and, on appeal, Plan Benefits Security Division

In re Robert Plan Corp. (Bankr. E.D.N.Y.)

This case involved a dispute with a Chapter 7 trustee over a bankruptcy court's jurisdiction to approve payments to the trustee and his retained professionals for work performed in terminating the debtor's 401(k) plan. On August 20, 2012, the bankruptcy court overruled the Secretary's objections and granted the fee applications, expressly providing that the trustee could use plan funds to pay the professionals, thereby effectively asserting jurisdiction over the ERISA plan and its assets. The Secretary appealed the portion of the August 2012 decision that asserted the bankruptcy court's jurisdiction to order the payment of fees from plan assets. On March 31, 2014, the district court ruled that the bankruptcy court lacked the power to order payment of the fees of the trustee and his professionals from plan assets. It more broadly stated that the bankruptcy court lacked jurisdiction over any of the actions taken by the trustee in his role as ERISA plan administrator except when the trustee was seeking"a specified dollar award" from plan assets. The trustee appealed to the Second Circuit. Oral argument was heard on January 15, 2015, and on February 5, 2015, the Second Circuit issued an approximately $1,383,875 decision affirming the district court. The Second Circuit identified each of the potential forms of possible bankruptcy court jurisdiction and explained why none of them applied when a bankruptcy trustee was fulfilling its role as ERISA plan administrator. In a footnote, the Second Circuit stated that it was leaving open the question of whether the bankruptcy court had jurisdiction when the trustee was seeking payment from a debtor's estate rather than a plan for services rendered in administering a plan. The bankruptcy trustee filed a petition for certiorari on May 12, 2015, and the Secretary filed the opposition on September 3, 2015. The Supreme Court denied cert. on October 13, 2015. The Chapter 7 trustee filed an application, dated December 21, 2016, for payment of final compensation and reimbursement of expenses, in which he inflated the amount of commissions to which he is entitled by improperly including in his calculation the distributions the trustee made from the plan, despite the fact that plan assets are explicitly excluded from a debtor's bankruptcy estate. Plan Benefits Security Division

Perez v. Slocum (Bankr. M.D. Pa.)

On December 1, 2015, the Secretary filed an adversary action against Scott Louis Slocum seeking to have Slocum's debt to the Dalton Mechanical Simple IRA Plan declared non-dischargeable because it resulted from fiduciary fraud, defalcation or embezzlement. Slocum was subject to a consent judgment, entered by a district court on May 12, 2011, requiring him to restore $41,093.44 to the plan as a result of unremitted employee plan contributions. The Secretary's adversary action alleges that Slocum has not complied with that consent judgment, that over $28,000 remains to be restored to the plan, and that this amount still owing is non-dischargeable. On March 17, 2016, the Secretary moved for a default judgment declaring the debt non-dischargeable. The court entered the order on April 4, 2016. Philadelphia Office

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N. Miscellaneous

Bond v. Marriott Internat'l (4th Cir.)

On January 16, 2015, a district court issued an order holding that a pension plan sponsored by Marriott was a top hat plan exempt from ERISA's vesting, funding and fiduciary requirements. The Secretary filed an amicus brief on May 28, 2015, supporting plaintiffs and arguing that under the Department's guidance, the plan was not a top hat plan. Oral argument, in which the Secretary participated, was held on October 28, 2015. On January 29, 2016, the Fourth Circuit issued a decision affirming the district court's order. The Fourth Circuit declined to rule on the top-hat plan issue the Secretary briefed and instead dismissed the case on timeliness grounds. Plan Benefits Security Division

In re George W. Mathias (7th Cir.)

This case concerns an insurer's use of a forum selection clause in the plan documents to overrule the plaintiff's choice of forum. The participant-plaintiff filed a suit against his insurer-defendant because the defendant attempted to charge the plaintiff for the insurers' own admitted failure to bill the correct amount of disability insurance premiums. Because the disabled plaintiff could not pay the charge, the insurer terminated his insurance. The plaintiff filed suit in the Eastern District of Pennsylvania near where he had worked and where he currently lives. The plan's forum selection clause, however, required all suits to be brought in the Central District of Illinois. The district court in Pennsylvania transferred the case to Illinois. In Illinois, the plaintiff moved to retransfer the case back to Pennsylvania. The district court in Illinois denied the motion to retransfer. The plaintiff then filed his petition for a writ of mandamus with the Seventh Circuit on October 28, 2016. On November 3, 2016, the Seventh Circuit invited the Secretary to file an amicus curiae brief on the venue issue. The Secretary filed an amicus curiae brief on December 8, 2016, arguing that forum selection clauses are contrary to ERISA's text and purposes. Plan Benefits Security Division

Iron Workers District Council of N.E. Pension Fund

As a corollary to the Secretary's successful efforts assisting the Department of Justice in pursuing the related USERRA Shea v. Iron Workers District Council of N.E. Pension Fund matter, the trustees of the Iron Workers District Council of N.E. Pension Fund excised language in the plan document that discriminated against veterans, in violation of USERRA. Accordingly, every present and future returning service member who is a participant of the Iron Workers N.E. Pension Fund is now protected and will properly receive pension credits for his or her time on active duty in the armed services. Shea received an immediate pension benefit and $180,000 in back pension benefits. On February 1, 2016, a favorable order on cross-motions for summary judgment was entered, and on June 22, 2016, the court entered an order of dismissal on settlement. Boston Office

United States of America v. Kevin Brown (D. Mass.)

The Secretary, in conjunction with the U.S. Attorney's Office, opposed Kevin Brown's petition for exemption from ERISA section 411, which imposes employment disqualifications on individuals convicted of certain crimes, including health care fraud and conspiracy to commit health care fraud, to which Brown plead guilty in October 2014. During Brown's tenure as vice president of operations at Health Management Advisors, LLC ("HMA"), he directed the submission of forged health insurance applications on behalf of unknowing plan participants, as a means of shifting costs from HMA's stop-loss insurance policy to state-run insurance plans. Brown was released from prison in May of 2016. He remains under supervised release and, pursuant to section 411, is disqualified for a period of 13 years from the date of his convictions, from serving or being permitted to serve any ERISA plan as an administrator, fiduciary, officer, trustee, custodian, counsel, agent, employee, or representative, and from serving as a consultant or advisor to an employee benefit plan. Brown petitioned the court for relief from this restriction, arguing that the ban should be lifted because his particular crimes did not warrant disqualification, that he would be merely serving as a"consultant to a consultant" on ERISA plans, and that he had been rehabilitated since conviction. The Secretary objected and asserted that the time since his conviction was insufficient for rehabilitation, that his characterization of his crimes was evidence of his lack of rehabilitation, and that his proposed employment clearly fell within the disqualification in section 411. Boston Office

In re Lorna Clause (8th Cir.)

This case concerns an insurer's use of a forum-selection clause in the plan documents to overrule the plaintiff's choice of forum. The district court for the District of Arizona issued a decision transferring this benefits case to St. Louis under a forum selection clause that purports to require the plan participant, an injured medical technician who lives in Phoenix and worked at a hospital there, to file suit in a district court in Missouri. Her attorneys filed a motion to transfer the case back to Arizona. On May 17, 2016, the district court issued an order declining to retransfer the case and additionally declining to certify the case for interlocutory review. The plaintiff filed a petition for mandamus in the Eighth Circuit on June 7, 2016, and the Secretary filed a brief supporting her on the merits of her argument on June 16, 2016, arguing that forum selection clauses are contrary to ERISA's text and purposes. The Eighth Circuit requested a response, and the defendants filed a response on July 12, 2016. The court denied the petition on September 27, 2016 without stating any reasons. Plan Benefits Security Division

Perez v. Roach, Jr. (D.D.C.).

On January 24, 2016, the Secretary filed this action against certain past and present trustees of the International Association of Machinists and Aerospace Workers (IAM) National Pension Fund for failing to loyally and prudently select service providers, routinely ignoring required procedures written in the governing plan documents, creating conflicts of interest, unlawfully soliciting and accepting gratuities from service providers, spending and permitting others to spend plan assets lavishly on unnecessary trips, parties, and inordinately expensive food and wine, and generally engaging in a pattern of conduct in which they disregarded their fiduciary duties. On July 18, 2016, the court entered a consent judgment and order requiring certain past and present trustees to pay $200,000 to the IAM fund, plus a civil penalty of $40,000. Plan Benefits Security Division

Smith v. Aegeon (6th Cir.)

This is an appeal from a district court decision dismissing a pension benefits case brought in Kentucky based on a forum selection clause incorporated into the plan more than seven years after the participant retired. The clause required him to file suit in Ohio rather than Kentucky. The plaintiff filed his opening brief on July 22, 2013. On August 12, 2013, the Secretary filed an amicus brief arguing that ERISA invalidates the forum selection clause. Oral argument, in which the Secretary participated, was held on January 24, 2014. The court issued a 2-1 adverse decision on October 14, 2014, upholding the forum selection provision. The plaintiff petitioned for certiorari, and the Supreme Court invited the Government's views. The Government filed a brief on November 25, 2015, reiterating the view that ERISA invalidates such clauses but requesting that the Court deny certiorari because the Sixth Circuit's decision was the first appellate decision on the issue. The Court denied certiorari on January 11, 2016. Plan Benefits Security Division

Solis v. Tomco Auto Parts, Inc. (C.D. Cal.); Solis v. Schoenfeld (In re Schoenfeld) (Bankr. C.D. Cal.); Perez v. Schoenfeld (9th Cir.)

On January 13, 2012, the Secretary filed a complaint against Tomco Auto Parts, Inc. and Richard Alan Schoenfeld, and on January 17, 2012, the Secretary filed an adversary complaint in Schoenfeld's Chapter 13 bankruptcy. The complaints allege that, between October and November 2004, Schoenfeld, as trustee of the company's ESOP, authorized improper withdrawals of $197,000 from the ESOP, $47,000 of which was never repaid. On January 27, 2012, the Secretary filed a motion to withdraw the bankruptcy reference and to remove the action to district court. On April 25, 2012, over Schoenfeld's objection, the court removed the matter to district court. On September 17, 2012, Schoenfeld filed a motion for partial summary judgment, arguing, among other things, that he was not liable for any losses because a settlement agreement between the defunct company and a successor addressed the liability and, as a matter of law, defalcation cannot be found. On September 26, 2012, the Secretary opposed the motion, and on October 29, 2012, the court denied Schoenfeld's motion. On October 26, 2012, the Secretary filed a motion for summary judgment on all claims, and on January 31, 2012, the court granted the Secretary's motion, finding that Schoenfeld breached his fiduciary duties and committed defalcation, rendering the debt non-dischargeable. The court also imposed injunctive relief, including requiring Schoenfeld to pay all costs of an independent fiduciary to terminate the plan and distribute its assets. On February 11, 2013, Schoenfeld appealed to the Ninth Circuit the court's conclusion that the judgment was non-dischargeable debt. On March 23, 2015, the Ninth Circuit remanded the case to the district court to assess the evidence under the standard announced in Bullock (abrogating Ninth Circuit precedent and requiring certain findings in connection with the fiduciary's state of mind to find defalcation). On August 12, 2015, the district court resumed the litigation of the two cases after remand by ordering a status conference and the submission of a joint status report. On August 31, 2015, Schoenfeld filed a motion for the independent fiduciary to be granted the authority by the court to use the funds from a Tomco insurance refund check to reimburse the plan. On September 4, 2015, the parties filed a joint status report identifying: (1) should the court approve the motion for the independent fiduciary to use the insurance refund to reimburse the plan, it will make the plan whole and satisfy all of her costs; and (2) the parties disputed whether making the plan whole would end the litigation because of the injunctive relief requested and the Ninth Circuit's remand did not disturb the underlying summary judgment order finding many ERISA violations. On September 29, 2015, the district court held that it would grant Schoenfeld's motion for the independent fiduciary to use the insurance refund to reimburse the plan, so Schoenfeld was no longer liable for his monetary judgment. The district court agreed with the Secretary's position that injunctive relief was not similarly affected by the Ninth Circuit's decision and on November 6, 2015, the court issued a judgment for injunctive relief against Schoenfeld, re-affirming the injunctive relief as"law of the case." On December 3, 2015, Schoenfeld once again appealed to the Ninth Circuit. Schoenfeld filed his brief on June 15, 2016. The Secretary filed a response brief with record excerpts on July 15, 2016. On appeal, the Secretary argued that Schoenfeld failed to appeal the prior decision on injunctive relief, and, therefore, the court below correctly rejected Schoenfeld's belated attempts to now set aside the injunction. See also Solis v. Tomco Auto Parts, Inc.; Solis v. Schoenfeld (In re Schoenfeld); Perez v. Schoenfeld, B.3. Miscellaneous. Los Angeles Office and, on appeal, Plan Benefits Security Division

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