Retirement plan administrator accused of stealing millions

Retirement plan administrator accused of stealing millions
EBSA found that the third-party administrator embezzled at least $5.5 million in retirement plan assets.
FEB 08, 2024

Following an exhaustive investigation, the Department of Labor has successfully obtained an emergency temporary restraining order against a Pittsburgh-based company that allegedly misappropriated millions of dollars from hundreds of retirement plans it had been entrusted to administer.

The order from the U.S. District Court for the Western District of Pennsylvania, in response to a legal action the DOL initiated January 26, was issued against RiversEdge Advanced Retirement Solutions and its principal, Paul Palguta.

"RiversEdge is a third-party administrator of at least 240 retirement plans that hold millions of dollars in plan assets and acts as an agent to manage and administer plan assets," the DOL said in a statement. "At least 229 of these retirement plans are covered by the Employee Retirement Income Security Act of 1974."

A detailed investigation by the Employee Benefits Security Administration, the DOL unit in charge of enforcing ERISA provisions, found that between October 2022 and January 2024, RiversEdge and Palguta systematically diverted funds from retirement plan trusts to corporate accounts under their control.

EBSA said they attempted to conceal those transactions – which saw at least $5.5 million in retirement plan assets funneled from 17 retirement plans – by submitting fraudulent account statements to the retirement plans, causing them to file inaccurate financial reports to the DOL that falsely inflated the value of the plan assets.

The TRO imposes several immediate restrictions on RiversEdge and Palguta. Among other sanctions, they are prohibited from any further management of trust assets, barred from serving as fiduciaries or service providers for any ERISA plans, and prevented from accessing funds in their corporate accounts, with the exception of payments approved by the court for independent fiduciary fees.

“The U.S. Department of Labor will take emergency legal action when fiduciaries violate the law by embezzling retirement plan assets,” Samantha Thomas, the DOL's acting regional solicitor, said in the statement. “The department is determined to protect the assets of employee benefit plans and to hold fiduciaries responsible for failing to discharge their legal duties to protect these assets.”

“We will act vigorously to protect plans from a service provider who violated the trust of plan participants by intentionally breaking the law,” echoed EBSA regional director Cristina O’Brien in Philadelphia.

The DOL is pushing for a permanent injunction against RiversEdge and Palguta, as well as an order to restore the embezzled assets to the affected retirement plans.

Investors need to know the differences between actively managed ETFs

Latest News

SEC bars ex-broker who sold clients phony private equity fund
SEC bars ex-broker who sold clients phony private equity fund

Rajesh Markan earlier this year pleaded guilty to one count of criminal fraud related to his sale of fake investments to 10 clients totaling $2.9 million.

The key to attracting and retaining the next generation of advisors? Client-focused training
The key to attracting and retaining the next generation of advisors? Client-focused training

From building trust to steering through emotions and responding to client challenges, new advisors need human skills to shape the future of the advice industry.

Chuck Roberts, ex-star at Stifel, barred from the securities industry
Chuck Roberts, ex-star at Stifel, barred from the securities industry

"The outcome is correct, but it's disappointing that FINRA had ample opportunity to investigate the merits of clients' allegations in these claims, including the testimony in the three investor arbitrations with hearings," Jeff Erez, a plaintiff's attorney representing a large portion of the Stifel clients, said.

SEC to weigh ‘innovation exception’ tied to crypto, Atkins says
SEC to weigh ‘innovation exception’ tied to crypto, Atkins says

Chair also praised the passage of stablecoin legislation this week.

Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest
Brooklyn-based Maridea snaps up former LPL affiliate to expand in the Midwest

Maridea Wealth Management's deal in Chicago, Illinois is its first after securing a strategic investment in April.

SPONSORED How advisors can build for high-net-worth complexity

Orion's Tom Wilson on delivering coordinated, high-touch service in a world where returns alone no longer set you apart.

SPONSORED RILAs bring stability, growth during volatile markets

Barely a decade old, registered index-linked annuities have quickly surged in popularity, thanks to their unique blend of protection and growth potential—an appealing option for investors looking to chart a steadier course through today's choppy market waters, says Myles Lambert, Brighthouse Financial.