The investigation into the application fraud by employees of the department’s street maintenance division began in December, after Prudential Retirement, which administers all 401(k) plans offered to public employees in the state, raised questions about some of the applications.
The retirement plan provider was tipped off because several of the forms cited the same reasons for withdrawals – ranging from $1,250 to $4,589 – and had similar details in common, such as the name of a mortgage company, according to the Charlotte Observer.
According to city Human Resources Director Tim Mayes, in addition to the firing of 11 employees, two employees resigned and five more were demoted or suspended.
Employees suspected of lying on their applications were suspended last week while the city conducted an investigation (See City Employees Investigated for Improper 401(k) Withdrawals ).
The investigation revealed that one employee began instructing other employees in 2005 on how they could get quick cash from their retirement accounts and over the next year or so, 17 other employees agreed to the scam by dating and signing withdrawal forms and letting the instigating employee send the forms to Prudential — a service for which he charged a variable fee.
Most 401(k) accounts allow hardship withdrawals only if participants meet a certain financial need and if the account holder has exhausted other options such as loans, but most of the forms in question, and only five of the employees met these criteria.
However, Mayes told the Observer that “A lot of these employees readily admitted without a lot of questioning that their hardships were not indeed hardships,” he said. “They felt like they needed some money, this guy said he had a way to get money out of their 401(k)s, and they took him up on the offer.”