Last fall the Federal Bureau of Investigation raided the offices of Vantage Benefits Administrators “amid concerns that money may be missing from retirement accounts the company manages.” Lawsuits brought by plans affected by the fraud now shed light on what went on.
This first ruling – a default judgment handed down by Judge David C. Godbey of the U.S. District Court for the Northern District of Texas (Caldwell and Partners Inc. v. Vantage Benefits Administrators, N.D. Tex., No. 3:17-cv-03459-N, default judgment 3/8/18) – against Vantage Benefits Administrators, Inc. and its CEO Jeffrey A. Richie for $10,170,452 in damages, plus $297,836 in attorneys’ fees and costs for violating the Employee Retirement Income Security Act on behalf of Caldwell and Partners, Inc. (CPI) as sponsor of and on behalf of the Caldwell and Partners, Inc. 401(k) Plan.
According to the suit brought by CPI, “following the alarming news of the FBI’s raid of Vantage, CPI took emergency measures to investigate the Richies’ actions,” and found that while a plan audit reported that the 100 participant plan had $10.4 million of assets as of Dec. 31, 2016, it turned out that the plan contained only $3.960 million, and that as of Nov. 1, 2017, “Vantage and the Richies illegally reduced the Plan to a mere $2,406,654.94; an amount approximately $8 million less than RSM, as auditor, represented to be held in the trust, just two weeks prior.”
The CPI suit notes that, beginning as early as 2013 and all the way through 2017, “Vantage and the Richies caused hundreds of independent transfers of Plan assets from the Plan directly to an account Vantage used to operate its business” – over 180 such transfers, totaling in excess of $5.5 million. The suit explains that the Richies “caused the wrongful transfers via Vantage’s computer equipment and relationship with the Plan’s directed trustee and custodian, Matrix.”
The suit specifically cites false reporting via statements to the plan and CPI, as well as a “web-based form or application hosted by the Plan’s trustee and custodian, Matrix, to cause the wrongful transfers of Plan assets,” via which “the Richies supplied false information to Matrix when directing the transfers,” specifically that “all such transfers were for the benefit of the Plan’s participants.”
By way of example, the suit cites an example involving a transfer of over $800,000 from the CPI plan to Vantage’s operating account during 2015 and 2016 for the purported benefit of a particular employee – an employee who, as it turns out, had less than $40,000 in their account. Moreover, this employee had resigned in late 2014, and withdrawn their entire balance at that time. Still, Vantage transferred roughly $433,000.00 in 2015, and $379,000.00 in 2016, “falsely representing that the transfers were distributions” for this employee. The suit also outlines other examples involving individuals who were not participants, and for whom Vantage did not produce statements, or on whose statements Vantage reflected different, and much smaller distributions.
That said, this is only the first to come to judgment – Knight's Cos. Inc. sued Vantage last month for allegedly making similar illegal plan transfers totaling $437,744, and in December, MBA Engineering Inc. accused Vantage of stealing approximately $2,269,653 from the company's retirement plans. In the latter case, those plaintiffs cite the action “some time prior to October 25, 2017” by Charles Leggette, an actuary employed by Vantage Benefits, who “detected abnormalities with certain accounts for which Vantage Benefits provided recordkeeping services.” Leggette subsequently filed with the IRS under the agency’s whistleblower program, and about this same time another Vantage Benefits employee filed a similar claim with the Labor Department, according to that suit.
Of course, Vantage Chief Jeff Richie “was sanctioned in 2008 by the Securities and Exchange Commission and barred from the investment business for three years ‘for conducting an unregistered and fraudulent offering’ of securities in the retirement-services company he was running at the time.” Richie, who neither admitted nor denied the allegations, had the $4.3 million SEC judgment waived based on his financial condition, according to the Dallas Morning News.
It’s doubtful that these will be the last such lawsuits filed against Vantage. The prospects for a full collection on the judgments?