The Department of Labor has sued Chimes District of Columbia, Inc., affiliated companies, company executives and employee benefit plan service providers, saying that an employee benefit plan sponsored by Chimes DC forked over millions in excessive fees.
The nonprofit Chimes DC employs disabled workers who provide janitorial and custodial services under multiple taxpayer-funded government contracts.
DOL said that an investigation by its Employee Benefits Security Administration found that Chimes DC, its parent company Chimes International and executives Martin Lampner and Albert Bussone violated the Employee Retirement Income Security Act by getting a Chimes DC health and welfare plan to pay millions in excessive fees—some to the plan’s third-party administrator, FCE Benefits Administrators, Inc. and some to another company, Benefits Consulting Group.
In a statement, FCE attorney Robert Eassa said, "The allegations raised in the complaint are without merit, and we are deeply disappointed that the DOL included FCE in its complaint against The Chimes. The DOL’s claims center on The Chimes Health and Welfare Benefit Plan (the Plan) and the governance of the Plan. FCE was never involved in the governance of the Plan. FCE simply served as the third party administrator for the Plan. The complaint challenges the compensation paid to FCE as well as the charitable contributions made by FCE to The Chimes’s philanthropic causes. All compensation received by FCE was pursuant to a written contract signed by The Chimes. In fact, the compensation FCE received was at or below the applicable market rate. FCE made charitable contributions, at The Chimes’s request, strictly to support their charitable programs that provide valuable community services for disabled persons. FCE’s motivation in making the donations was solely to benefit the disabled individuals who were the charity’s beneficiaries. The DOL never contacted any member of the FCE management team or a single FCE employee to discover accurate information. If it had, we feel certain FCE would not be part of this complaint. The DOL’s failure to conduct a proper investigation, with respect to our company, is regrettable and its attacks on our character are unfair, unreasonable and unfounded. FCE has full confidence that this matter will be resolved expeditiously and in its favor."
The DOL says not only did principal owners Gary Beckman and Stephen Porter know that FCE caused the plan to engage in transactions for their own benefit, FCE also exercised control over the plan’s contracts with other service providers to boost FCE’s compensation through undisclosed commissions and fees.
Bussone and Lampner solicited hundreds of thousands of dollars from FCE and BCG, asking for the money ostensibly as donations to The Chimes Foundation, a charitable fundraising arm of Chimes International LTD.
FCE and BCG jointly pledged $330,000 to the foundation in 2009, and in the pledge noted that an “additional $55,000 will be paid for a one-year option of continuing benefit services to our Chimes partner.”
Between 2009 and 2014, FCE paid more than $400,000 to The Chimes Foundation while BCG paid at least $282,500. Lampner also got FCE to employ his child, and BCG’s owner provided discounts to Chimes DC on other nonplan work.
In connection with the payoffs and other favors granted to people and entities associated with Chimes International, FCE and BCG were illegally retained as service providers for the health and welfare plan. As a result, FCE, Porter, Beckman, BCG and Ramsey are liable for profits earned.
FCE also got rebates, commissions, and other payments from the plan’s trustee, as well as the plan’s providers of various services, including stop-loss insurance, prescription drug benefits, behavioral health and employee assistance programs, and services related to medical benefits.
Chimes DC and FCE had agreed that most commissions or rebates paid by plan service providers to FCE should be forwarded to the plan, but DOL said that FCE kept payments, lying to Chimes DC about having sent them to the plan.
In addition to asking that all defendants account for profits and disgorge those from fiduciary breaches (or participation in those breaches) and prohibited transactions, the DOL is asking for Chimes and FCE defendants to restore any losses to the plan.
It also seeks the removal of FCE, Beckman, Porter, Bussone, Lampner, BCG, and Ramsey as fiduciaries or service providers for any ERISA-covered plan sponsored by Chimes International LTD; permanent bars against FCE, Bussone, Lampner, BCG and Ramsey acting as fiduciaries or service providers for any plan covered by ERISA; and the appointment of an independent fiduciary to manage the Chimes DC Plan.
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