SAN FRANCISCO – The U.S. Department of Labor has secured a judgment against San Francisco-based California Pacific Bank and four individual fiduciaries, requiring them to pay $866,840 in retirement benefits, plus interest, to employees who participated in the company’s stock ownership benefits plan.
After a trial, the U.S. District Court for the Northern District of California found the defendants acted “in blatant disregard of the express terms of the plan document and of their fiduciary duties” under the Employee Retirement Income Security Act. The court ordered Richard Chi, the bank’s chairman, president and CEO and his fellow trustees Akila Chen, Kent Chen and William Mo to pay the employees cash, plus interest, into their retirement accounts. The court also found that the defendants diverted $81,407 of an account receivable that belonged to the plan to the bank improperly, and wrongfully transferred $69,745 from the plan’s account to the bank. The court ordered the defendants to repay these amounts too, with interest.
An investigation by the department’s Employee Benefits Security Administration determined that, after California Pacific Bank terminated its employee stock ownership plan in December 2010, the plan’s fiduciaries were required to sell the plan’s bank stock and pay the participants, in cash, into their retirement accounts. EBSA found the fiduciaries failed to do what the plan required, and did not follow their fiduciary duties to act in the best interest of the participants. Instead of liquidating the bank stock and paying cash into the retirement accounts of the plan’s participants, they divided up the plan’s stock and put stock, rather than cash, into IRAs for plan participants. The bank is not a publicly traded company, making it difficult if not impossible for the plan participants to sell the bank shares they received.
“The court’s order restores to workers the retirement benefits they were promised,” said Jean Ackerman, director of EBSA’s San Francisco regional office. “The judgment is clear: plan fiduciaries must act not in their own interest, but in the best interests of the employees who participate in their benefit plans.”
The court entered the judgment on Oct. 24, 2016. EBSA’s regional office in San Francisco investigated the case, and the department’s Office of the Solicitor, Plan Benefits Security Division in Washington litigated the matter. Workers or employers with questions or concerns about healthcare, retirement, or other benefit plans can contact the Employee Benefits Security Administration toll free at 866-444-3272. Additional information can be found at www.dol.gov/ebsa/.
California Pacific Bank is a privately held commercial bank headquartered in San Francisco.