PLANADVISER - May/June 2018 - 13

the plan's trustees-used plan assets to pay $344,225 to
Park Street Properties, which Mays owned. They also transferred
$782,250 in plan assets to Maple Leaf Development
LLC, which both men owned; $17,077 to Upper Cumberland
Building Consultants LLC, which was owned by Mays'
brother; and $50,000 worth of plan's assets back to Eye
Centers of Tennessee.
Wells Fargo Faces Revenue-Sharing Lawsuit
The Chattanooga Fire & Police Pension Fund filed a complaint
in Tennessee state court asking for a full accounting from
Wells Fargo of any compensation it has received from third
parties during its years as trustee of the fund.
According to correspondence between the fund and
the bank reviewed by The Wall Street Journal, the bank
admitted it had kept revenue-sharing payments it owed to
the retirement fund. Wells Fargo said this resulted from " a
system set-up error. "
According to the Journal, the bank recently told the
pension fund that the system problem had been corrected.
However, the retirement fund disagrees with the amount of
revenue sharing Wells Fargo says it received.
In a statement provided to PLANADVISER, Wells Fargo
said, " We acknowledge that because there was a change
directed by the client in 2017, we made an error in setting
up the revenue sharing associated with that change appropriately,
and the revenue-share rebates did not occur as
intended. We are sorry this error occurred, and upon
discovery, the issue was fixed, and the total revenue share
received from the third-party fund companies (approximately
$15,000) was returned to the pension fund. We
have been in active dialogue with the client and have been
committed to resolving this matter and are disappointed
they felt the need to file a complaint requesting information
we have provided and are very willing to provide. "
ERISA Lawsuit Against Lowe's, Aon Hewitt
The latest example of Employee Retirement Income Security
Act (ERISA) litigation has been filed in the U.S. District
Court for the Western District of North Carolina, targeting
both the Lowe's Companies Inc. and Aon Hewitt Investment
Consulting for a number of alleged fiduciary breaches.
The core of the complaint is as follows: " Lowe's imprudently
selected and retained the Hewitt Growth Fund for the
[company 401(k)] plan, in consultation with Hewitt (which
served as the plan's fiduciary investment consultant), despite
the fact that: 1) The Hewitt Growth Fund was a new and
largely untested fund at the time it was added to the plan; 2)
The ... fund was underperforming its benchmark at the time
it was added ... and continued to underperform after[ward];
and 3) The fund was not utilized by fiduciaries of any similarly
sized plans and was generally unpopular in the marketplace. "
According
to the text of the complaint, defendants
placed $1 billion of the Lowe's 401(k)'s assets into the new
fund. At least some of the money, plaintiffs allege, was
inappropriately reallocated from eight existing funds in
the plan, " which were generally performing well, " when
the Hewitt Growth Fund replaced these options on the
investment menu.
Prison Time for 2 ERISA Fraudsters
An investigation by the U.S. Department of Labor (DOL)'s
Employee Benefits Security Administration (EBSA) and the
FBI has led to prison sentences for two former officials of
First Farmers Financial LLC (FFF) in Orlando, Florida.
Both officials have entered guilty pleas for their involvement
in the sale of $179 million in fraudulent loans to a
Milwaukee company that provided investment services
to 42 retirement plans covered by the Employee Retirement
Income Security Act (ERISA). Following the guilty
pleas, the U.S. District Court for the Northern District of
Illinois sentenced former FFF President Timothy Fisher to
120 months in prison, then two years' supervised release,
and ordered restitution of $27,651,838. Fisher pled guilty to
money laundering.
According to the DOL and FBI, Fisher's plea agreement
follows the March 6 sentencing of former CEO Nikesh Patel,
who pleaded guilty to five counts of wire fraud in connection
with the sale of the loans. The court sentenced Patel
to 25 years in prison and three years of supervised release,
and ordered him to make $174,791,812 in restitution to the
sham loan scheme's victims, including 42 retirement plans.
DOL Issues Further ESG Guidance
The Department of Labor (DOL) has issued Field Assistance
Bulletin (FAB) No. 2018-01, which provides guidance
to the Employee Benefits Security Administration (EBSA)'s
national and regional offices to assist in addressing questions
they may receive from plan fiduciaries and other
interested stakeholders about the exercise of shareholder
rights and written investment policy statements (ISPs) in
relation to Interpretive Bulletin (IB) 2015-01, which concerns
" economically targeted investments " (ETIs).
The DOL directly acknowledged that environmental,
social and governance (ESG) factors " may have a direct
relationship to the economic and financial value of an
investment. When they do, these factors are more than
just tiebreakers, but rather are proper components of the
fiduciary's analysis of the economic and financial merits of
competing investment choices. "
But, in the new FAB, the DOL says fiduciaries must not
too readily treat ESG factors as economically relevant to
the particular investment choices at issue when making a
decision. " It does not ineluctably follow from the fact that
an investment promotes ESG factors, or that it arguably
promotes positive general market trends or industry growth,
that the investment is a prudent choice for retirement or
other investors, " the FAB says. " Rather, ERISA [Employee
Retirement Income Security Act] fiduciaries must always put
first the economic interests of the plan in providing retirement
benefits. A fiduciary's evaluation of the economics of an
investment should be focused on financial factors that have a
material effect on the return, " the FAB says. -PA
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PLANADVISER - May/June 2018

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