A California company and its management team have been ordered by the U.S. District Court for the Northern District of California to repay $1.1 million to 13 employee benefit plans.
The Department of Labor’s Employee Benefits Security Administration had sued Zenith Capital, an investment advisory firm in Santa Rosa, Calif., and its three retirement plan fiduciaries, Rick Lane Tasker, Martel Jed Cooper and Michael Gregory Smith for breach of their fiduciary duty.
The court found that the defendants breached their fiduciary duties and engaged in prohibited transactions when they placed 13 employee benefit plans into Global Money Management, a hedge fund that collapsed and went bankrupt.
The complaint alleged that Zenith Capital and the three individual defendants placed the plans in the high-risk hedge fund despite the fact that the plans were not qualified, accredited investors, and failed to conduct prudent due diligence on Global Money Management or its suitability as investment for the plans.
They also failed to disclose GMM’s ownership interest in Zenith Capital and their receipt of incentive fees from GMM for the plans that it placed into Global Money Management. The general partners of GMM were convicted of mail and wire fraud in connection with GMM.
Zenith was ordered to pay $602,018 in restitution for plan losses and restoration of the improper incentive fees, plus lost opportunity costs and penalties payable to the department. The individual defendants were ordered to restore $503,385 in plan losses, incentive fees and penalties.
Tasker, Smith and Cooper are barred permanently from serving or acting as discretionary fiduciaries, investment managers or trustees or administrators to an ERISA-covered plan.