DOL probes Geller for ERISA violations

Retirement plan administrator allegedly had ties to auditor it recommended

Feb 7, 2010 @ 12:01 am

By Jed Horowitz

The Labor Department is investigating Geller Group LLC, a retirement plan administrator and registered investment adviser, for failing to disclose alleged ties to an accounting firm it recommended as an auditor and for other possible violations, according to former employees and others close to the investigation. The probe, which began with the Labor Department's Employee Benefits Security Administration and includes at least one representative of the Office of Labor Racketeering and Fraud, is in the early stages but could lead to prosecution by the Justice Department, they said. Lester Caesar, who headed the auditing firm in question, confirmed that he has been reported by the EBSA to the American Institute of Certified Public Accountants' professional-ethics division. He said he is contesting EBSA's conclusions. The AICPA doesn't comment on cases unless sanctions are brought. However, it has the power to expel a member and also can refer its findings to the New York State Education Department, which can revoke a CPA's certification, said Bill Roberts, a spokesman for the accounting group. A Labor Department spokeswoman and agency officials believed to be conducting the investigation declined to comment.

Geller, which administers $1.8 billion of corporate retirement plans to about 1,000 clients and is an affiliate of the roll-up firm Focus Financial Partners LLC, sublet space at its office in midtown Manhattan to Caesar & Associates PC from late 2005 through last summer, issued paychecks to the auditing firm's employees for some of that time, and made pricing decisions on the audits, former employees said. Geller's managing partners — Sheldon Geller and Manny Erlich — also were trustees of the small auditing firm's retirement plan, which ended 2005 holding $80,927 for five employees, according to an Internal Revenue Service filing.

Geller actively marketed Caesar & Associates as an efficient way for clients to fulfill regulatory requirements, despite the Employee Retirement Income Security Act of 1974's mandate that auditors be independent of plan administrators and record keepers.

“We reduce your need to confer with another service provider to reconcile IRS Form 5500 [which firms with more than 100 employees must file annually] and the audited financial statements,” Geller's website said in 2006, referring specifically to Caesar & Associates and its ability to prepare “a cost-effective audit report and accountant's opinion ... We streamline the audit engagement by managing all phases of the plan audit.”

That language was removed from Geller's website after Mr. Caesar began issuing paychecks directly to employees in late 2007, as was a pledge by Geller to consult “at no additional fee” with auditors of clients who did not choose Caesar, sources said. The web page still boasts that Geller is “likely” to help clients “reduce your audit fee and relieve your human resources and financial managers from spending valuable time on the plan audit engagement.”

Last summer, after a lengthy in-office examination by the Labor Department of Caesar & Associates' ability to conduct adequate audits of about 80 clients with just three active auditors, Mr. Caesar sold the auditing business to an employee, Julie Chodor, and now focuses solely on his accounting practice, Lester S. Caesar & Co.

“The practice has been sold, Geller is completely out of it, and I'm completely out of it,” he said. Mr. Caesar said he is unaware of any further investigation by the Labor Department.

Ms. Chodor said her two-person firm, Chodor & Associates, moved out of Geller's offices to less expensive quarters almost immediately. She insisted that she and her colleagues always worked “independently of Geller,” although Caesar & Associates did use Geller's computer server and other technology. It can be argued that an auditor benefits from working out of the same location as a plan administrator because of the ease of access to records, she added.

Ms. Chodor said she was unaware of any continuing Labor Department investigation.

Experts in retirement plan administration said Labor Department investigations of third-party plan administrators are rare. They added that it's virtually unheard of for administrators to have ties to auditors that review the administrators' fees and services. Such relationships also could create problems for plan sponsors, which have fiduciary responsibilities to their plans.

“It's so ridiculously wrong that I can't imagine it,” said Diane Wasser, a partner in charge of pension services at CPA firm Amper Politziner & Mattia LLP. “One of the simplest principles for auditors is being independent. It doesn't pass the smell test by even one degree.”

At least one Geller client said he questioned the relationship and dropped Caesar after several years.

“We had some concerns as to whether there was real independence there, with the auditor in the same office,” said David Ash, chief executive of Sam Ash Music Corp. “It was a great convenience to have a one-stop shop, but as we got bigger, we got more sophisticated about our responsibilities.”

The musical-instrument retailer, which has about 1,500 employees, still uses Geller, he said. “They have a very good reputation, but as much as we like Sheldon [Geller], there's no way we wouldn't review a move.”

Mr. Geller, an ERISA attorney and CPA who began his third-party plan administration practice in 1984 with his former father-in-law, said his recommendations of Mr. Caesar's firm were no different from “any number of professional referrals” he makes with accountants, lawyers and RIAs.

But some former employees, as well as people involved in the investigation, said that the probe could reach beyond the issue of coziness between Geller and the auditor. Geller, which also picks investments for many plans in its role as an RIA, may be investigated to determine if it disclosed to clients how much it was paid by companies such as Fidelity Investments, The Charles Schwab Corp. and Nationwide Financial Services Inc. to select their investment products and fund platforms.

The firm might also face probes on whether it properly used such revenue sharing to reduce clients' servicing fees and whether it told its employees to devise ways for plan sponsors to circumvent ERISA anti-discrimination rules, the sources said.

“I left Geller Group in 2007 because I felt that their business practices conflicted with my role as an ERISA attorney working with plan sponsors and their retirement plan needs,” said Ary Rosenbaum, who was director of ERISA legal services at Geller and its predecessor firm, Geller & Wind Ltd., from late 2002 through early 2007.

Mr. Ash said that he feels confident that Geller uses its revenue-sharing fees properly to reduce plan costs, adding that he directed his lawyer to work on the issue with the company a few years ago. People familiar with the investigations said there are many gray areas associated with ERISA enforcement and warned that the process could be lengthy and may not result in criminal referrals or civil fines.

Mr. Geller, a founding member of Fidelity's TPA Advisory Council and Schwab's Retirement Plan Advisory Board, and author of several articles in professional journals on ERISA obligations, said he wouldn't comment on charges from a “disgruntled employee” and was unaware of any continuing investigations.

“There are investigations, and routine investigations, of all types of service providers,” Mr. Geller said. “We had many over 25 years, and we have no compliance issues.”

His recommendation of Mr. Caesar was akin to countless other referrals Geller made, he said.

Any allegations of cozy ties between Geller and Caesar & Associates were unsubstantiated, he added.

Mr. Erlich, who former employees said runs the firm operationally, did not return a call for comment.

Focus Financial Partners bought an interest in Geller Group and its RIA, Geller Advisory Group LLC, in 2006, and Focus' chief financial officer, James Shanahan, worked for several months after the deal on the same floor as Caesar's operation, two staircases down from Geller's main office, said three people who previously worked at the firm. Mr. Shanahan declined to comment.

The Geller Group has more than 75 employees and more than 1,000 client relationships, according to its website. Its RIA, Geller Advisory Group, has $909 million under management in 349 accounts, with about $1.1 million that is discretionary, according to RIA Database.

E-mail Jed Horowitz at


What do you think?

View comments

Recommended for you

Upcoming Event

Oct 23


Women Adviser Summit - San Francisco

The InvestmentNews Women Adviser Summit, a one-day workshop now held in four cities due to popular demand, is uniquely designed for the sophisticated female adviser who wants to take her personal and professional self to the next level.... Learn more

Featured video


Financial health of advisory firms is excellent. Or is it?

Deputy editor Bob Hordt and senior columnist Jeff Benjamin discuss the fact that double-digit growth in revenue and assets doesn't necessarily spell a rosy future.

Latest news & opinion

Don't be fooled by the numbers — the industry is in a dangerously vulnerable state

Last year's stock market gains helped advisers turn in solid growth in assets and revenue, but that growth could disappear in the next market downturn.

Divided we stand: How financial advisers view President Trump

InvestmentNews poll finds 49.2% approve of his performance, while 46.7% disapprove. How has that changed over the course of his presidency?

10 states with the most college student debt

Residents of these states have the most student debt when you consider their job opportunities.

Ex-Wells Fargo brokers sue for damages, claiming they lost business in wake of scandals

In a Finra arbitration complaint, two brokers allege that Wells Fargo's problems damaged their business.

Invesco to buy OppenheimerFunds

Deal brings Invesco another $246 billion in assets, as well as high-fee actively managed funds.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print