US Labor Department sues City National Bank and officers

LOS ANGELES – The U.S. Department of Labor has filed a lawsuit against the fiduciaries of the City National Corp. Profit Sharing Plan. Filed in the U.S. District Court for the Central District of California Western Division, the lawsuit alleges that the plan lost more than $4 million when fiduciaries engaged in self-dealing and conflicted transactions involving plan assets when they caused the plan to pay excessive fees to City National Bank and its affiliates.

Defendants include City National Bank; Executive Vice President for Human Resources Marianne Lamutt; Chief Financial Officer Christopher Carey; Executive Vice President, General Counsel and Secretary, Michael B. Cahill; and Senior Vice President and Manager Michael Nunnelee.

“This case is significant because we have a financial institution reaping excessive profits from the plan that its employees participate in,” said Los Angeles regional director for the Employee Benefits Security Administration Crisanta Johnson. “All of this could have been avoided if the fiduciaries had simply reimbursed themselves in accordance with the law. Instead, they created a payment scheme that drained plan assets.”

An EBSA investigation found that, through the end of 2011, plan fiduciaries and affiliates received millions of dollars in compensation, commissions and fees at the expense of the plan. Rather than outsource plan services to avoid potential conflicts of interest, or reimburse themselves for only direct expenses, City National Bank and other fiduciaries established compensation rates for the plan on par with those charged to the bank’s retail clients. By doing so, they created conflicts that resulted in multiple breaches of the Employee Retirement Income Security Act.

The compensation issues were compounded because City National Bank employees were not required to track the amount of time they spent working on plan issues. This allowed large and unreasonable fees to be charged to the plan. Proper tracking and monitoring of expenses could have prevented this and limited plan expenses.

The lawsuit follows an investigation by the EBSA Los Angeles Regional Office. The case is being litigated by the department’s Regional Office of the Solicitor in San Francisco. Workers and employers with questions on employee benefits plans can contact EBSA at www.dol.gov/ebsa/contactEBSA/consumerassistance.html.

U.S. Department of Labor news materials are accessible at www.dol.gov. The department’s Reasonable Accommodation Resource Center converts departmental information and documents into alternative formats, which include Braille and large print. For alternative format requests, please contact the department at (202) 693-7828 (voice) or (800) 877-8339 (federal relay).