The U.S. Department of Labor has obtained a preliminary injunction against two Lexington, Ky.-based pension plan fiduciaries for allegedly using nearly $40 million of retirement funds as their own personal bank account.
George Hofmeister and Bernard Tew of Bluegrass Investment Management LLC – former fiduciaries of the Hillsdale Salaried, Hillsdale Hourly, Revstone Casting Fairfield GMP Local 359 and Fourslides Inc. pension plans based in Lexington, Ky. – were accused of engaging in a series of prohibited transactions resulting in the misuse of $12.1 million form the Hillsdale Salaried pension plan, about $22.5 million for the Hillsdale Hourly pension plan, $4.4 million from the Revstone plan and $500,000 from the Fourslides Inc. pension plan.
"Those entrusted with managing these pension funds have shown an utter disregard for the workers, who are relying on the money for their retirement," said Phyllis Borzi, the assistant secretary of labor who heads the Employee Benefits Security Administration. "Our aim is to make this right for those workers."
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The department filed suit against the two following an Employee Benefits Security Administration investigation that found violations of the Employee Retirement Income Security Act, including prohibited loans to related companies, prohibited use of plan assets for the purchase and lease of employer property, prohibited purchase of customer notes form affiliated companies, prohibited transfer of assets in favor of parties-in-interest, payment of excessive fees to service providers and payment of fees on behalf of the companies.
The department's investigation of pension plans revealed that the alleged improper use of the plans' assets began within days or months of Hofmeister assuming control of the pension plans. The department contends that Hofmeister placed millions of dollars in pension plan assets at risk and has consistently failed to act to protect these assets when required.
Fiduciary Counselors Inc. was appointed to administer the four pension plans. Hofmeister, who was the trustee for all four plans, is no longer a fiduciary for the plans and is prohibited from taking any actions with respect to the pension plans or assets. Tew, who was managing director of their investment service provider, resigned as a fiduciary of the plans a few days before a hearing regarding the DOL's motion.
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