New Plaintiff Class Charges Matrix in Vantage Benefits Theft

Another suit has been filed in the aftermath of the theft of retirement plan money by third-party administrator Vantage Benefits – this one against the custodian – and by plaintiffs looking to represent more than a single plan.

The suit, filed by plaintiffs Dave Youngblood (a 403(b) Plan Accountholder with the Texas A&M University System Tax Deferred Account Plan) and Don Steinbach (also a 403(b) Plan Accountholder with the Texas A&M Plan) on behalf of themselves “and other § 403(b) retirement plan accountholders…whose § 403(b) investments were managed by Matrix Trust Company…” alleges that, from approximately May to October 2017, “Matrix made several substantial transfers of § 403(b) plan assets directly to Vantage Benefits Administrators, per Vantage’s directions for same, without direction or authorization from the § 403(b) plan administrators or accountholders.”

The action followed an Oct. 31, 2017 raid by the Federal Bureau of Investigation on the offices of Vantage Benefits Administrators “amid concerns that money may be missing from retirement accounts the company manages.” Vantage Benefits described itself as a full-service TPA specializing in corporate benefit programs, with a focus on small plans (under $10 million). To date, several of the plans impacted by the theft have filed suit against Vantage (a default judgment was handed down by Judge David C. Godbey of the U.S. District Court for the Northern District of Texas earlier this year.) More recently, Matrix Trust Company – custodian for the plans administered by Vantage Benefits – was added as a party to a suit, with the plaintiffs there charging that Matrix was a functional fiduciary – a claim that Matrix Trust has rejected.

Current Allegations

In the present case, plaintiffs claim that Matrix “fraudulently transferred at least three million dollars ($3,000,000.00) from the § 403(b) plan accounts in its custody, resulting in the substantial diminution of the § 403(b) plan accounts.” The plaintiffs say that these “unsanctioned” transfers were taken from at least five 403(b) plans and deposited into a private Bank of America business account maintained by Vantage or its agents. The suit claims that email-like messages Vantage sent through the TPA Portal offered plan participants in connection with its services directed that the fraudulent transfers be made from the plaintiffs’ and Class Members’ 403(b) plans into the Vantage account, though this was “not an authorized destination for plan assets.”

The suit goes on to claim that Matrix did not verify that the transfer orders were authorized under the terms of the individual 403(b) plans or by the 403(b) plan accountholders, and that “without accountholder authorization, Matrix unilaterally completed each of the fraudulent transfers of § 403(b) Plan Assets into the Vantage Account solely at the instruction and direction of Vantage and in violation of the terms of the § 403(b) Plans…. In breach of its fiduciary duty to the accountholders.”

Colorado Citation

The plaintiffs here claim that under Colorado law, a trust exists between two entities where “one of them holds property for the benefit of the other,” and that a “trustee is a fiduciary under Colorado law.” Moreover, they claim that “Matrix accepted possession of millions of dollars of Plaintiffs’ and Class Members’ §403(b) Plan Assets to manage said assets for the benefit of Plaintiffs and Class Members, thereby establishing a fiduciary duty.” Apparently setting aside ERISA’s requirements, the plaintiffs go on to allege that Matrix “…was a functional fiduciary with respect to Mr. Youngblood, Mr. Steinbach, and the Class Members because it, in fact, exercised authority and control over their § 403(b) Plan Assets,” that in accepting possession of millions of dollars of 403(b) plan assets, “…Defendant exercised authority and control over the § 403(b) Plan Assets by unilaterally disbursing said assets to the Vantage Account without any authorization or direction from Plaintiffs or Class Members.” They conclude their argument by stating that, “to say that Matrix did not have control over the § 403(b) Plan Assets while Matrix held them is to say that no one had control during this time.”

The plaintiffs note that the Matrix accounts were established in the plans’ names, but that Vantage and its agents “sent instructions and directives to Matrix through electronic messaging in the TPA Portal to complete the transfers – without any notice to or consent by Plaintiffs,” and that “even though Matrix knew that that Vantage and its agents were not the § 403(b) Plan Accountholders or depositors of the § 403(b) Plan Assets it held, Matrix completed each prohibited transfer solely at the instruction of Vantage or its agents, without authority or direction from the § 403(b) Plan Accountholders.” This the plaintiffs characterize as an exercise of “unilateral control,” alleging that that transferring those funds to the Vantage Account “without any authorization or direction from the Plaintiff” was “in violation of its fiduciary obligations under Colorado law.”

Statement Suppressions

Moreover, the plaintiffs claim that from approximately May through October 2017, “at the sole direction of Vantage and without informing Plaintiffs, Matrix suppressed the § 403(b) Plans’ trust statements on its account administration systems, and failed to provide the § 403(b) Plans’ trust statements to Plaintiffs and the § 403(b) Plans, even though it had no authority from Plaintiffs or the § 403(b) Plans to follow such instruction from Vantage.” They conclude that, “without receiving the §403(b) Plans’ trust statements, Plaintiffs could not and did not become aware that funds had been fraudulently transferred from their § 403(b) Plan Accounts to the Vantage Account.”

The plaintiffs note that while other cases have been filed related to plans administered by Vantage Benefits, “none of the other cases filed to date, have asserted claims on behalf of or concerning a § 403(b) plan or § 403(b) plan participants,” and that the U.S. District Court for the Northern District of Texas is the proper venue for these cases because Vantage has its principal place of business in that district.

For its part, Matrix Trust asserted through a spokesman that, “This lawsuit is completely without merit. Matrix Trust Company did not manage these investment accounts or serve as a trustee or fiduciary for them. This lawsuit involves accounts that were opened and managed by Vantage Benefits Administrators. Matrix’s actions were consistent with its custodial agreements and intends to vigorously defend itself against these baseless claims.”

Add Your Comments

One Comment

  1. url url'>Jeff Bennett
    Posted July 5, 2018 at 12:27 pm | Permalink

    This action sounds like it is without merit. Typical lawyers trying to find someone with resources to hold accountable.

    However, Matrix agreeing to suppress distribution of trust statements is cringe worthy.

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