Compliance May 11, 2018

DOL Wins Restitution of Misused 401(k) Assets

A federal district court has ordered eye-care company Eye Centers of Tennessee LLC, its owner Dr. Larry E. Patterson, and its office administrator Raymond K. Mays to pay $971,622 in restitution to the company’s 401(k) plan.

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The U.S. District Court for the Middle District of Tennessee has ordered eye-care company Eye Centers of Tennessee LLC, its owner Dr. Larry E. Patterson, and its office administrator Raymond K. Mays to pay $971,622 in restitution to the company’s 401(k) plan after an investigation by the U.S. Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) found violations of the Employee Retirement Income Security Act (ERISA).

This restitution amount is in addition to the $788,850 the defendants paid to the plan in May 2016 as restitution in a related criminal matter. The court also ordered that Eye Centers of Tennessee LLC, Dr. Patterson, and Mr. Mays be removed as fiduciaries, and permanently enjoined from serving as fiduciaries to any future employee benefit plans.

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The EBSA investigation found that Patterson and Mays—the plan’s trustees—used plan assets to pay $344,225 to Park Street Properties, owned by Mays. They also transferred $782,250 in plan assets to Maple Leaf Development LLC, which was owned by Patterson and Mays; $17,077 to Upper Cumberland Building Consultants LLC, which was owned by Mays’ brother; and $50,000 worth of plan’s assets back to Eye Centers of Tennessee.

In addition, Patterson and May used plan assets to purchase an 8,562-square-foot commercial property in 2006 for $285,000, and secured a mortgage for $325,000 for the property, which was then leased to the Pit Barbell Club, owned by Mays’ wife, for $5,000 per year. The monthly lease payments were only about one-sixth of the profit-sharing plan’s $2,618 monthly mortgage on the property.

“Our goal is not only to protect employees who have suffered losses from their pension plans and to prevent violations in the future, but to ensure that other employers who follow the law are operating on a level playing field,” said Stanley Keen, EBSA Regional Solicitor in Atlanta.
Compliance May 11, 2018

Wells Fargo Faced With Revenue Sharing Lawsuit

Despite Wells Fargo's admission and resolution of an error, the Chattanooga Fire & Police Pension Fund wants an accounting of all compensation the bank received while it was trustee of the fund.

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The Chattanooga Fire & Police Pension Fund filed a complaint in Tennessee state court asking for a full accounting from Wells Fargo of any compensation it has received from third parties during its years as trustee of the fund.

According to correspondence between the fund and the bank reviewed by The Wall Street Journal, the bank admitted it had kept revenue-sharing payments it owed to the retirement fund. Wells Fargo said it was the result of “a system set-up error.”

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According to the Wall Street Journal, the bank recently told the pension fund that the system problem had been corrected. However, the retirement fund disagrees with the amount of revenue sharing Wells Fargo says it received.

In a statement provided to PLANADVISER, Wells Fargo said: “We acknowledge that because there was a change directed by the client in 2017, we made an error in setting up the revenue sharing associated with that change appropriately, and the revenue share rebates did not occur as intended. We are sorry this error occurred, and upon discovery, the issue was fixed, and the total revenue share received from the third party fund companies (approximately $15,000) was returned to the pension fund. We have been in active dialogue with the client and have been committed to resolving this matter and are disappointed they felt the need to file a complaint requesting information we have provided and are very willing to provide.”

Despite Wells Fargo’s admission, the retirement fund also filed a whistleblower complaint with the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission outlining the bank’s alleged improprieties.

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