Labor Department Sues Former Gateway Data Sciences Officers For Misusing Retirement Plan Assets

Archived News Release — Caution: Information may be out of date.

Los Angeles, California - The U.S. Department of Labor filed suit November 13 against the Gateway Data Sciences Corporation and its officers for allegedly violating the Employee Retirement Income Security Act (ERISA) by not sending money withheld from employees’ paychecks to their retirement plan. The department is seeking to restore losses to the plan of the now-defunct company, which was based in Phoenix, Arizona.

Filed in U. S. District Court for the District of Arizona, the suit results from an investigation by the Los Angeles regional office of the department's Pension and Welfare Benefits Administration (PWBA). Besides Gateway Data Sciences Corp., the suit names as defendants Michael M. Gordon, president and CEO of the company; Lauren Gordon, spouse; and Vickie B. Jarvis, CFO of the company. Gordon and Jarvis also served as trustees to the plan until February 1, 1996, at which time they became the sole members of the plan's administrative committee.

The plan is a defined contribution plan funded by a combination of voluntary employee contributions and loan payments deducted from plan participants' paychecks (employee contributions) and mandatory employer contributions. Plan contributions were to be forwarded to Charles Schwab Retirement Plan Services, which in turn was to invest and allocate the plan assets among several investment funds as directed by individual participants.

The department alleges that beginning with the pay period ending January 31, 1997, and continuing through February 23, 1998, employee contributions of $152,350, loan payments of $11,546, and mandatory employer contributions of $961 were not forwarded to Schwab, according to Billy Beaver, Los Angeles regional director for the PWBA.

The suit asks the court to require the defendants to restore all losses suffered by the plan, including lost interest and lost opportunity costs; to require the plan to set off Gordon and Jarvis's individual plan accounts against the losses caused by the alleged misconduct; to remove Gordon and Jarvis as fiduciaries of the plan; to appoint an independent fiduciary to make distributions to the plan's participants; to require Gordon and Jarvis to pay for all costs associated with the appointment and retention of the independent fiduciary; and to bar Gordon and Jarvis from serving as fiduciaries of or service providers to any employee benefit plan covered by Title I of ERISA.

(Chao v. Gateway Data Sciences Corporation
Civil Action No. 01-2204 PHX-ROS)

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