DOL Sues Contractors over Prohibited Loans, Investments

The Department of Labor (DOL) has filed a lawsuit against a Lilburn, Georgia contracting firm, on behalf of the firm’s retirement plan participants, to recover losses resulting from prohibited loans and investments.

The lawsuit, Perez v. Burgess Baird Jr (docket number: 1:14-cv-00282-CAP), was recently filed in the U.S. District Court, for the Northern District of Georgia, Atlanta Division. It names Burgess Baird Jr., the fiduciary of the employee profit-sharing retirement plan, and DSI Contracting Inc. as defendants.

Through the suit, the DOL seeks to have the defendants restore all plan losses, including interest or lost opportunity costs to the plan, which occurred as a result of the defendant’s breach of their fiduciary obligations. The suit also asks the court to reverse each prohibited transaction. In addition, the DOL asks that the court permanently enjoin the defendants from serving as fiduciary, administrator, officer, trustee, custodian, agent, employee, representative, or having control over the assets of any employee benefit plan subject to the Employee Retirement Income Security Act (ERISA), and to appoint a successor fiduciary at defendant Baird’s expense.

An investigation by the DOL’s Employee Benefits Security Administration (EBSA) found that after establishing a profit-sharing retirement plan for its employees in March 1980, DSI Contracting Inc. and Baird failed in their fiduciary responsibility to the plan, committing prohibited transactions by causing the plan to purchase real estate contiguous to property DSI was developing, known as the Stonebrook division.

The EBSA also found that Baird issued loans to participants in amounts that exceeded the amounts allowed under the terms of the plan document. The proceeds of the participant loans were used to invest in Stonebrook. Baird also issued a $490,000 loan from the plan to a real estate company, called Burge Realty LLC, which in turn, used the proceeds of the loan to buy 10 lots in the Stonebrook development. Finally, Baird failed to attempt to collect on the participant loans or the loan to Burge Realty, resulting in large losses to the plan.

The full text of the complaint can be downloaded here.