The United States Department of Labor announced a settlement with Shirley and Vernon Hill Sept. 23 over alleged mismanagement of Moorestown-based InterArch’s profit-sharing plan.
Under the terms of the agreement, the couple must pay more than $2 million to restore mismanaged assets to the company’s retirement plan and in penalties.
Shirley Hill is the founder of InterArch. An investigation by the department’s Employee Benefits Security Administration (EBSA) determined the Hills violated their fiduciary duties under the Employee Retirement Income Security Act. In particular, it found that between August 2016 through the plan’s termination in June 2020, the couple had overinvested in Metro Bank and Republic First Bank – two financial institutions that were headed by Vernon Hill – while failing to sell shares even as prices for each institution fell.
Vernon Hill was ousted earlier this year as CEO and chairman of Republic Bank in a well-documented and vicious proxy battle, which NJBIZ chronicled extensively.
More: The battle for Republic First Bank
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- Republic Bank CEO Hill files federal lawsuit to stop ouster
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Officials said the undiversified investing patterns resulted in the loss of millions of dollars to the plan.
“The law requires fiduciaries to discharge their duties solely in the interest of plan participants and beneficiaries in a prudent manner, and to diversify plan investments so the risk of large losses is minimized,” said EBSA acting Regional Director Cristina O’Brien. “Fiduciaries are also prohibited from using plan assets for their own interests.”
In late August, the Department of Labor filed a federal civil lawsuit alleging that InterArch and the Hills engaged in self-dealing while violating their duties of prudence and to diversify, which caused the plan to enter into prohibited transactions.
On Sept. 23, the court entered a consent judgement that requires InterArch and the Hills to pay $1,836,853 to plan participants and $183,685 in penalties to resolve the allegations. As part of the judgement, the Hills will be barred from serving as fiduciaries of any ERISA-covered employee benefit plans in the future.
Additionally, the company and the couple will pay approximately $1.1 million to the retirement plan to resolve a separate but related private class action lawsuit filed by a former employee.
Between the settlement and the private class action lawsuit settlement, more than $3 million will be restored to the retirement plan in total.
“The Employee Benefits Security Administration is satisfied that his settlement will result in a substantial recovery to plan participants of the losses that the fiduciaries’ actions caused,” said O’Brien. “Plan fiduciaries must ensure they comply with ERISA’s provisions to protect workers’ retirement income. EBSA is committed to ensuring the integrity of employee benefit programs and hold those who violate the law accountable.”
“This case demonstrates the U.S. Department of Labor’s ongoing commitment to recovering losses caused by plan fiduciaries’ failure to comply with the law,” said Regional Solicitor of Labor Jeffrey Rogoff.
In August, Jeffrey Pasek, attorney for the Hills and InterArch, told NJBIZ that they were looking forward to working with the Department of Labor to resolve their concerns.
Pasek did not return a request for comment by publication of this story.