The U.S. Department of Labor has filed suit against San Francisco's Pacific Bank, alleging the bank, its CEO and three additional fiduciaries of its Employee Stock Ownership Plan mismanaged plan assets potentially resulting in $1.4 million in plan losses.
The government alleges that when the Pacific Bank fiduciaries terminated the ESOP in 2010, they failed to distribute plan assets in cash as required under the Employee Retirement Income Security Act. Instead, the ESOP participants were stuck with company stock, which the complaint alleges was difficult — if not impossible — to liquidate for cash.
Government investigators found participants would have received nearly $1.24 million had the stock been liquidated at the time of termination, using December 2009 assessed values. Instead, the complaint alleges that in 2011, $81,407 was improperly diverted to California Pacific Bank as well as an additional nearly $70,000 diverted in 2012. Finally, investigators allege the bank held onto plan assets in non-interest accruing bank accounts where the funds were available for bank use without charge and without earning interest on the plan funds.
Recommended For You
The Department of Labor is requesting the court require the fiduciaries repay all losses caused to the plan.
Named in the complaint were California Pacific Bank CEO, Richard Chi, who served as plan administrator and plan trustee. Along with Chi, three board members with fiduciary responsibility were named: Akila Chen, Kent Chen and William Mo. The suit also calls for the removal of all four bank officials from their fiduciary duties and replacing them with an independent fiduciary who would oversee the liquidation and termination of the plan.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
