By Hal M. Bundrick
NEW YORK (MainStreet)--A pension trustee and investment advisor raided $40 million in pension funds for their personal gain, according to lawsuits filed by the U.S. Department of Labor against George S. Hofmeister and Bernard Tew, former fiduciaries of four Lexington, Kentucky-based pension plans. The U.S. District Court for the Eastern District of Kentucky has granted in part the DOL's motion for a preliminary injunction against the pair.
Hofmeister was the trustee and Tew was managing director of their investment service provider, Bluegrass Investment Management LLC. The court's order removes Hofmeister as a fiduciary of the plans and prohibits him from taking any actions with respect to the pensions plans or their assets. The DOL says Tew resigned as fiduciary of the plans a few days before a hearing regarding the department's motion.
The lawsuits alleged that the defendants engaged in a series of prohibited transactions resulting in the misuse of approximately $40 million from four pension plans all closely affiliated with Lexington-based Revstone Industries LLC and Spara LLC.
"Those entrusted with managing these pension funds have shown an utter disregard for the workers, who are relying on the money for their retirement," said Phyllis C. Borzi, the assistant secretary of labor who heads the Employee Benefits Security Administration. "Our aim is to make this right for those workers."
The suits follow an EBSA investigation that found violations of the Employee Retirement Income Security Act (ERISA), including prohibited loans to related companies, prohibited use of plan assets for the purchase and lease of employer property, prohibited purchase of customer notes from affiliated companies, prohibited transfer of assets in favor of parties-in-interest, payment of excessive fees to services providers, and payment of fees on behalf of the companies.
Nearly $40 million in pension plan assets were allegedly diverted to benefit the defendants or related parties, activities which began shortly after Hofmeister assumed control of the pension plans.
--Written by Hal M. Bundrick