A federal judge has sided with the Department of Labor and prohibited a third-party administrator and its president from accessing ERISA-covered retirement plan assets it services.
In January, Acting Labor Secretary Julie Su filed a lawsuit against third-party administrator RiversEdge Advanced Retirement Solutions LLC and Paul Palguta, the firm's sole owner, president and CEO, in the U.S. District for the Western District of Pennsylvania in Pittsburgh.
From October 2022 through January 2024, the defendants, Palguta and Riverside, allegedly embezzled at least $5.5 million in retirement plan assets from 17 retirement plans by transferring them from retirement plan trusts into their own corporate accounts, according to a an investigation by the department's Employee Benefits Security Administration cited in the complaint.
EBSA additionally found that the defendants allegedly attempted to conceal the embezzlement when they issued fraudulent account statements to the retirement plans causing them to file false reports with the department that overstated the amount of assets in the trust accounts, the Labor Department said in a news release. When retirement funds lacked sufficient assets to process transactions, the defendants transferred plan assets from other trusts to cover the shortfall, the department added.
On Feb. 5, Judge Marilyn Horan issued an emergency temporary restraining order forbidding RiversEdge and Palguta from serving as fiduciaries or service providers to any ERISA plans.
The judge also appointed Receivership Management, Inc., as an independent fiduciary to oversee an accounting of the 17 mismanaged plans, which include 401(k) plans, 403(b) plans and deferred compensation plans.
The Labor Department said it is still pursuing litigation seeking a permanent injunction and order that requires the defendants to restore the missing plan assets to the retirement plans and forbids them from serving as fiduciaries to any plan in the future.
"The U.S. Department of Labor will take emergency legal action when fiduciaries violate the law by embezzling retirement plan assets," said Acting Regional Solicitor of Labor Samantha Thomas in the news release. "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."