Eleventh Circuit upholds $1.2M damage award; fiduciary admitted he violated PT rules


A district court’s order to a 401(k) plan fiduciary to pay over $1.2 million to the plan was appropriate, where the fiduciary admitted in both deposition testimony and a plea agreement that he violated ERISA’s prohibited transaction rules, the U.S. Court of Appeals in Atlanta (CA-11) has ruled.

Fiduciary’s admissions

In deposition testimony, the plan fiduciary acknowledged he was responsible for certain transactions between a 401(k) plan for which he was sole trustee and another company. He used an alias to participate in decisions to issue bonds from the company to the plan. The money gained from those transactions was then loaned to companies owned by the fiduciary.

In a plea agreement in a criminal proceeding, the fiduciary admitted to transferring nearly four million dollars from the plan to the intermediary company, and then re-transferring that money to companies he owned.

Summary judgment

Given these admissions, the district court properly found this conduct to constitute dealing with plan assets for the benefit of a party in interest and for the fiduciary’s own interest, in violation of the prohibited transaction rules of ERISA §406.

The appellate court therefore upheld the district court’s award of summary judgment to the Secretary of Labor. The appellate court also upheld the district court’s rulings on various procedural and evidentiary issues. Thus, the fiduciary’s own account balance in the plan could be offset against the amount he owed to the plan.

In addition, the appellate court affirmed the lower court’s rulings in evidentiary matters. Accordingly, the fiduciary had no right under the Federal Rules of Evidence to receipt of interrogatories and additional documents directly from a Labor Department investigator. Finally, factual admissions from the fiduciary’s criminal plea agreement were appropriately admitted as evidence in the civil proceeding.

Source: Secretary, Department of Labor v. Seibert (CA-11).