DoL Sues California RIA for Undisclosed Incentive Receipt

Zenith Capital, a registered investment advisory (RIA) firm, allegedly collected incentive fees from a hedge fund in exchange for investing retirement plan assets in the fund.

U.S. Department of Labor (DoL) has sued the Santa Rosa, California-based firm and its executives for investing the assets of 13 retirement plan clients in the hedge fund Global Money Management LP and receiving undisclosed incentive fees from the hedge fund’s sponsor and manager.

According to a news release, the DoL lawsuit alleges that Zenith Capital and executives Rick Lane Tasker, Michael Gregory Smith, and Martel Jed Cooper violated their fiduciary obligations under the Employee Retirement Income Security Act (ERISA). The defendants allegedly made investment decisions for their ERISA plan clients.

From April 1999 to September 2003, the defendants caused the plans to invest in Global Money Management and received undisclosed incentive fees from LF Global Investments LLC, the general partner and manager of Global Money Management, the government charged. In addition to paying Zenith incentive fees not disclosed to the 13 ERISA plan clients, LF Global held an ownership interest in Zenith.

In 2004, Zenith Capital LLC was an RIA with 1,214 clients and approximately $538 million in assets under management.

“We will vigorously pursue investment advisers who try to line their own pockets by illegally steering pension investments,’ said Bradford P. Campbell, assistant secretary for the DoL’s Employee Benefits Security Administration (EBSA), in the news release. “Fiduciaries must invest solely in the interests of the workers to whom these funds ultimately belong.”