A federal judge Monday denied a motion to dismiss in a lawsuit against Chimes International Ltd. alleging the Baltimore-based nonprofit breached its fiduciary duty as overseer of its employee health plan.
The amended complaint, filed in June by the U.S. Department of Labor, claims Chimes and senior executives failed to “prudently and loyally” monitor the plan’s administration and expenses since 2008 but paid millions of dollars in excessive expenses run up by its corporate representative and third-party administrator.
FCE Benefit Administrators Inc., the third-party administrator of the plan, argued in its motion to dismiss it was not a co-fiduciary of Chimes and the complaint did not sufficiently allege any self-dealing. But U.S. District Judge Richard D. Bennett disagreed, finding the government had alleged facts to sustain its claims at the motion-to-dismiss phase.
There are still multiple motions to dismiss pending for other defendants, according to the memorandum opinion filed Monday.
Chimes, a nonprofit that provides job training to the disabled, has denied the government’s allegations.
In its lawsuit, the Labor Department claims that, based on financial reports, the Chimes defendants knew or should have known about the excessive plan expenses.
Former president Martin Lampner and former Chief Operating Officer Albert Bussone also allegedly solicited more than $680,000 in donations to Chimes’ charitable foundation from the plan’s representative, Benefits Consulting Group, and FCE, in violation of duties under the federal Employee Retirement Income Security Act.
Attorneys for the defendants countered that Lampner and Bussone were well within their authority as officers of the charitable foundation to seek donations from the plan administrator and representative without violating ERISA.
The lawsuit also claims Lampner “solicited” FCE to hire his son in 2010, a time when Lampner was negotiating FCE’s fees and recommending that the contract with the administrator be renewed.
“By the conduct alleged in this complaint, the Chimes defendants received benefits, in the form of FCE’s payments to the Chimes Foundation and FCE’s employment of Martin Lampner’s child, in connection with the plan’s retention of FCE, and thus failed to loyally discharge their fiduciary duties [under ERISA]; failed to prudently discharge their fiduciary duties, in violation of ERISA … and dealt with assets of the plan in their own interest or for their own account” in violation of ERISA, the Labor Department alleges.
The lawyers dispute Lampner’s alleged impropriety in inquiring about a job at FCE for his adult child, saying that Chimes’ president did not control the governance committee that retained FCE as plan administrator.
The department seeks a court ordering requiring the Chimes defendants to restore losses caused to the plan and account for and disgorge all profits received as a result of ERISA violations.
The case is Thomas E. Perez, Secretary of Labor v. Chimes International Ltd. et al., No. 15-cv-3315-RDB.
Daily Record legal affairs writer Steve Lash contributed to this report.