According to the suit, Bethesda, Maryland-based Dynasty Construction Inc. and owner John J. Barrett III had more than $775,000 from the 401(k) plan invested in a fraudulent scheme in 2006, in violation of the Employee Retirement Income Security Act (ERISA). This amount represents nearly all of the assets in the accounts of the 19 plan participants as of the end of 2005.
The suit resulted from an investigation by the department’s Employee Benefits Security Administration (EBSA) and was filed in the U.S. District Court for the District of Maryland. It alleges that the defendants failed to adequately or prudently research the credentials of the financial representative they retained and the investment of plan assets in the Transcontinental Airlines Employee Investment Savings Account, a fraudulent scheme orchestrated by Louis Pearlman, who is serving 25 years in federal prison.
“These acts have jeopardized the retirement security of former Dynasty employees by those charged with the responsibility of protecting workers’ benefits,” said Phyllis C. Borzi, assistant secretary of labor for employee benefits security. “The Labor Department will not stand for it, and we will take all actions necessary to make sure workers receive their hard-earned benefits.”
The suit seeks to restore to the plan all losses, including interest and lost opportunity costs. It also would require the defendants to provide all books, documents and records relating to the finances and administration of the plan, as well as remove the defendants as fiduciaries of the plan and any other employee benefit plan. The defendants would be permanently enjoined from acting directly or indirectly in any fiduciary capacity with respect to any employee benefit plan and from exercising any custody, control or decision-making authority with respect to the assets of any employee benefit plan covered by ERISA. Finally, the suit seeks the appointment of an independent fiduciary to manage and administer the plan.
Dynasty Construction Inc. ceased operations in 2007.
The case is Solis v. Dynasty Construction Inc. et al. Case No. 8:12-cv-00249-DKC.
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