Outsourcing Firm Accused of Diverting Money from ERISA Plans

July 7, 2010 (PLANSPONSOR.com) – Federal officials are investigating Franklin, Tennessee-based Sommet Group for allegations of stealing and embezzling money intended for employee benefit plans.

A search warrant requested by the Internal Revenue Service states that Sommet, principally through its managing partner L. Brian Whitfield, led clients to believe it would pay payroll obligations, health insurance claims, and 401(k) contributions while knowing the funds were comingled into a single general account and would not be paid properly.  According to the warrant, Whitfield routinely engaged in financial transactions with the clients’ money.  

Although Whitfield knew that Sommet no longer had the ability to cover health care and retirement plans, he continued to solicit funds for that purpose. In doing so, Whitfield and others violated their fiduciary duties under the Employee Retirement Income Security Act (ERISA), the officials allege. 

The warrant mentions problems with Sommet’s third-party administrator for health insurance plans. In November of last year, Health First Solutions indicated that their relationship with Sommet became strained because Sommet was regularly failing to provide funds for them to pay. After not correcting the problem in January, Health First terminated its contract with Sommet. 

Sommet has failed to fund insurance claims in the amount of $2.1 million, according to authorities.

The warrant can be viewed here.

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