Former Orange County Investment Firm Sued Over Mismanagement Of Profit Sharing Plan

Archived News Release — Caution: Information may be out of date.

The owner of a real estate investment firm, Bainbridge Investments, Inc., formerly located in Orange County, Calif., was sued by the U. S. Department of Labor for improperly operating the company’s profit sharing plan. The plan was financially illiquid and resulted in its inability to pay benefits owed to participants.

Elden W. Bainbridge, the owner of the company and a trustee of the plan, now resides in Englewood, Colo. Bainbridge Investment bought, managed, built and sold commercial and industrial real estate primarily in California. The profit sharing plan covered 24 participants and had $470,111 in assets as of April 1995.

The Labor Department alleges that Bainbridge caused the plan to be financially illiquid because of a series of plan investments in real estate and loans made to participants and unrelated third parties. According to the lawsuit, Bainbridge:

• made participant loans totaling $96,000 without executing proper loan documents or obtaining security for the loans;

• made two loans totaling $125,000 to the owners of a veterinary clinic whereby the clinic was used as the collateral for both loans. Proceeds from these loans were passed from the borrower, through an intermediary, to Bainbridge; and

• failed to foreclose on the clinic as required under the loan documents and reconveyed the deed of trust on the veterinary clinic back to the owners.

The lawsuit seeks a court order requiring that Bainbridge restore all losses resulting from the series of improper plan loans and correct any transactions prohibited by the Employee Retirement Income Security Act (ERISA). The lawsuit also seeks the appointment of an independent trustee to manage the plan, payment of all costs of the trustee by Bainbridge, and the permanent bar of Bainbridge from serving in a position of trust to any plan governed by ERISA.

The lawsuit was filed on April 29 in federal district court in Denver. The case resulted from an investigation conducted by the Kansas City Regional Office of the Labor Department’s Pension and Welfare Benefits Administration into potential violations of ERISA.

(Herman v. Bainbridge)
Civil Action No. 98-N-947

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Archived News Release — Caution: Information may be out of date.

Contact Name:GLORIA DELLA
Phone Number: 202.219.8921