DOL: Retirement Plan Administrator Embezzled $5.5M

A federal judge this week issued a preliminary injunction against a Pennsylvania retirement plan administrator accused of embezzling at least $5.5 million in assets from multiple plans.

The action by the U.S. District Court for the Western District of Pennsylvania follows a complaint and motion filed by the U.S. Department of Labor in January and an emergency temporary restraining order issued earlier this month.

The order bars defendants RiversEdge Advanced Retirement Solutions LLC in Sewickley, Pennsylvania, and owner Paul Palguta from further involvement with trust assets and from serving as fiduciaries or service providers to any plans covered by the Employee Retirement Income Security Act of 1974, or ERISA.

The court order also forbids RiversEdge, a third-party administrator of at least 240 retirement plans, and Palguta from withdrawing any funds from two corporate accounts into which they are alleged to have illegally transferred plan assets, except for court-ordered payment of independent fiduciary fees.

It also requires them to preserve all relevant records for transfer to a court-appointed independent fiduciary, and requires the independent fiduciary to oversee an accounting of 17 allegedly mismanaged plans. Fourteen of the allegedly mismanaged plans are covered by ERISA, according to the preliminary injunction.

The allegedly mismanaged plans include the nonprofit Christian Aid Mission's 403(b) plan, an LCBC Church 403(b) and the St. Barnabas Health System Retirement Savings Plan, according to the injuction order.

The plans that RiversEdge administered hold millions of dollars in assets, DOL said in a release. ERISA covers at least 229 of these retirement plans.

An investigation by the department's Employee Benefits Security Administration determined RiversEdge and Palguta violated ERISA.

EBSA alleges that from October 2022 through January 2024, they embezzled at least $5.5 million in assets from 17 retirement plans by transferring them from retirement plan trusts into their own corporate accounts.

EBSA additionally alleged that the defendants aattempted to conceal the embezzlement by issuing 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.

When retirement funds lacked sufficient assets to process transactions, the firm and Palguta transferred plan assets from other trusts to cover the shortfall, according to DOL, which said it is pursuing litigation seeking a permanent injunction and order that requires the defendants to restore the missing 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 Philadelphia. "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," said EBSA Regional Director Cristina O'Brien in Philadelphia.

RiversEdge didn't immediately response to a request for comment sent through the firm's online contact form.

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