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February 18, 2015 at 08:15 AM
Just as more complaints roll in regarding the Department of Labor’s planned release of revised fiduciary rules for retirement accounts, a federal district court in Philadelphia has ruled in favor of a DOL fiduciary breach suit brought in 2009, levying a $39.8 million judgment in the case.
After nearly six years of litigation, the court on Feb. 6 entered a $39.8 million judgment, protecting the rights of workers who participated in more than 400 death benefit plans mismanaged by lawyer John J. Koresko V and the companies he controlled, as well as a former associate, Jeanne Bonney.
The judge ruled that Koresko of Bridgeport, Pennsylvania, and other defendants diverted tens of millions of dollars in plan assets through more than 21 accounts using more than 18 different entities at more than eight different banks.
“Spanning more than 12 years, the scheme saw assets from the plans’ trusts, used for real estate purchases in South Carolina and the Caribbean island of Nevis, to pay outside attorneys, lobbying expenses, operational expenses of Penn-Mont Benefit Services Inc., and Koresko’s law firms, and for Koresko’s personal expenses, such as boat rentals and utilities,” the order states.
“The defendants completely disregarded the duty of loyalty they owed to the employee benefit plans and the workers who rely on them,” said Phyllis Borzi, Assistant Secretary of Labor for Employee Benefits Security, in a statement. “In an ideal world, this does not happen. When it does, there is justice in undoing this massive fraud, and in banning the defendants from coming anywhere near employee benefits again.”
The plans primarily provided death benefits to participants nationwide and were established in connection with Koresko’s Regional Employers’ Assurance Leagues Voluntary Employees’ Beneficiary Association and Single Employer Welfare Benefit Plan, the order states.
The court found that Koresko and the following defendants, all fiduciaries, transferred plan assets out of the plans’ trusts, in violation of the Employee Retirement Income Security Act:
- Penn-Mont Benefit Services, Inc., of Bridgeport, which is owned by Koresko;
- Koresko’s current and former law firms;
- Jeanne Bonney, an attorney formerly associated with the law firms; and
- Penn Public Trust, a company controlled by Koresko.
Nearly $20 million of the amount due to the plans is frozen in accounts under the control of an independent fiduciary, after a July 2013 court order. The Feb. 6 decision found the defendants, with the exception of Bonney, liable for $19,852,114 in restitution for losses and disgorgement of profits, which represents the remaining balance of the total diverted assets.
The DOL’s redraft of its rule to amend the definition of fiduciary under ERISA is expected to be filed at the Office of Management and Budget for a 90-day review any day now. Once OMB reviews the redraft, DOL will put it out for public comment. Law Firm Blasts DOL Fiduciary Plan
