Labor Department receives judgment for more than $1.3M from DSI Contacting Inc. after misuse of employee retirement funds

Date of action: July 24, 2015

Type of action: Summary judgment and order

Names of defendants: Burgess Baird Jr. and DSI Contracting Inc.

Allegations: The U.S. Department of Labor’s Employee Benefits Security Administration filed a complaint against Burgess Baird Jr. and DSI Contracting Inc., a residential development company based in Lilburn, Georgia. The complaint alleged that the defendants failed in their fiduciary responsibility to the employee profit sharing retirement plan by committing numerous prohibited transactions. During the course of the investigation, the agency found that the defendants used the plan’s funds to purchase real estate contiguous to Stonebrook subdivision, a property DSI was developing. Baird issued loans to participants in amounts that exceeded the terms of the plan and the proceeds of the loans were used to invest in Stonebrook. Baird also issued a loan from the plan to a real estate company which, in turn, used the proceeds of the loan to buy lots in the Stonebrook development. Finally, Baird failed to attempt to collect on the participant loans or the loan to the realty company, resulting in large losses to the plan.

In the complaint, the department asked the court to order the defendants to restore all losses, including interest or lost opportunity costs to the plan, which occurred as a result of the defendants’ breach of their fiduciary obligations; reverse each prohibited loan transaction; permanently enjoin the defendants from serving as fiduciary, administrator, officer, trustee, custodian, agent, employee, representative, or having control over the assets of any employee benefit plan subject to the Employee Retirement Income Security Act, and to appoint a successor fiduciary at the defendants’ expense.

Resolution: In the judgment the court found in favor of the department. The court ordered the defendants to restore to the plan a total of $1,381,444.78, which includes prohibited expenditures and lost opportunity costs, plus any additional lost opportunity costs accruing after September 2014. Defendants are permanently enjoined from serving as fiduciaries or from having control over the assets of any employee benefit plan and are enjoined from future violations of ERISA. Defendants shall be removed from their position as fiduciaries to the plan and the court shall appoint an independent fiduciary to administer the plan. The secretary is invited to suggest an independent fiduciary to the court.

Court: United States District Court, for the Northern District of Georgia, Atlanta Division.

Docket Number: 1:14-cv-00282-LMM

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