The U.S. Department of Labor filed a lawsuit against a Plymouth Meeting, Pa., company and its CEO because of violations of the Employee Retirement Income Security Act.
The Employee Benefits Security Administration conducted an investigation of Dietrich & Associates Inc., an insurance brokerage firm, finding that Kurt E. Dietrich, the CEO and sole shareholder of the company received $522,047 plus interest from illegal activities related to the company's role as fiduciary to Memorial Hospital-West Volusia Inc.'s pension plan.
Memorial Hospital, in Deland, Fla., merged with Adventist HealthCare system in about 2003. As part of that merger, the hospital terminated its defined benefit pension plan and sought the purchase of a single-premium group annuity to ensure the payment of vested benefits. Dietrich acted as plan fiduciary in securing the annuity.
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It its suit against Dietrich & Associates, the DOL alleges that the defendants violated their fiduciary duties by receiving undisclosed and impermissible compensation totaling $522,047 from Hartford Life Insurance Co. in connection with the annuity purchase, exceeding the $50,000 that Memorial Hospital agreed would be paid for the defendants' services.
Additionally, the suit alleges that Dietrich & Associates deceived the pension plan and its fiduciaries by falsifying the final bids of Hartford's competitors so that Hartford would appear to have the lowest bid. This action prevented the pension plan from knowing the true cost of the defendants' services and deprived the pension plan of the opportunity to negotiate the amount of any insurer-paid commission or other payment as an element of the total cost of its annuity.
"The defendants clearly abused their authority by receiving this illegal compensation," said Marc Machiz, EBSA's regional director in Philadelphia. "This action underscores our commitment to hold fiduciaries accountable when they fail to meet their legal responsibilities."
In addition to giving up the illegal profits, the department's suit seeks to permanently enjoin the defendants from serving as fiduciaries to any ERISA-covered plans.
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