Fiduciaries Removed for Misusing Retirement Plan Funds

The Department of Labor filed suit against fiduciaries of a medical corporation’s pension plan for using plan assets for personal expenses.

An investigation by the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) found that Alfred and Judy Chan, the fiduciaries of a pension plan for the employees of their Lakewood, Washington, medical corporation, violated their fiduciary duties to administer the plan prudently and solely on behalf of its participants.

The Chans relocated to Taiwan in February 2011 shortly before an impending indictment for Medicare Fraud. Once in Taiwan, Alfred and Judy Chan did not appoint an administrator of the pension plan in their absence, did not file mandatory reports about the plan, and did not give their former employees the pension benefits owed to them.

Instead, EBSA alleges in a lawsuit, the Chans used the pension plan’s assets to pay for personal debts, personal legal fees and other personal, non-plan expenses and investments. Specifically, the complaint says Judy Chan invested $200,000 of the pension assets in Facebook Stock LLC under a different name to repay a debt. She also took more than $100,000 of the plan assets to pay for personal legal fees, and failed to deposit $31,137 of plan assets into the pension plan’s accounts.

On May 21, the U.S. District Court for the Western District of Washington approved a consent judgment permanently enjoining the defendants from causing any assets to be removed from any account or limited liability company held in the plan’s name. The court has ordered that upon the appointment of an independent fiduciary selected by EBSA, the defendants shall be removed as fiduciaries to the plan and the Chans permanently enjoined from serving as fiduciary or service provider to any employee benefit plan subject to ERISA.

The court also orders that Alfred and Judy Chan shall not recover any amount from the plan unless and until the rest of the participants receive the distributions owed to them in full, which is more than $400,000.

The court’s consent judgment and order is here.