The Department of Labor and the fiduciaries of the New Jersey-based design firm InterArch have agreed to a settlement following an investigation from the department’s Employee Benefits Security Administration.
The EBSA determined that InterArch, its CEO, Shirley Hill, and her husband, Vernon Hill, must pay more than $2 million to restore mismanaged assets to the company’s retirement plan and in penalties as part of the settlement, according to a release from the agency. The pair were accused of violating their fiduciary duties under the Employee Retirement Income Security Act, leading to the mismanagement of plan assets that allegedly resulted in significant losses.
According to the EBSA, from at least August 2016, through the plan’s June 2020 termination, the fiduciaries invested as much as 70% of the plan’s assets in the stock of Metro Bank PLC, where Vernon Hill was the chairman. Additionally, the defendants allegedly invested at least 13% of the plan’s assets in the stock of Republic First Bancorp Inc., where Vernon Hill was a senior leader.
The defendants were accused of failing to diversify the plan’s holdings during this period, even as the share prices for both Metro Bank and Republic Bank fluctuated significantly before it fell drastically in value, resulting in millions of dollars in losses to the plan.
Following EBSA’s investigation, the department’s Office of the Solicitor in New York filed a complaint in the U.S. District Court for the District of New Jersey alleging that InterArch and the two individual fiduciaries engaged in self-dealing and violated their duties of loyalty and prudence and their duty to diversify, which caused the plan to enter into prohibited transactions.
The court entered a consent judgment and order on September 23, requiring InterArch Inc. and its fiduciaries, the Hills to pay $1,836,853 to plan participants and $183,685 in penalties to resolve the allegations, the release states. The judgment also bars the Hills from serving as fiduciaries of any ERISA-covered employee benefit plans in the future.
InterArch Inc. and the Hills will additionally pay about $1.1 million to the retirement plan to resolve a separate but related private class action lawsuit filed by a former employee and those similarly situated in the U.S. District Court for the District of New Jersey on May 27, 2020, the release states. A proposed settlement was reached in the private class action lawsuit, which alleged similar ERISA violations as the department’s complaint.
In total, between the department’s settlement and the private class action lawsuit settlement, more than $3 million will be restored to the retirement plan.
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