US Labor Department sues DC-area government contractor
and employee benefit plan service providers

WASHINGTON — The U.S. Department of Labor has filed a lawsuit in the U.S. District Court for the District of Maryland against Chimes District of Columbia, Inc., affiliated companies, company executives and employee benefit plan service providers over allegations that an employee benefit plan sponsored by Chimes DC paid millions of dollars in excessive fees. The non-profit Chimes DC employs disabled workers who provide janitorial and custodial services under multiple taxpayer-funded government contracts.

An investigation by the department's Employee Benefits Security Administration found that Chimes DC, its parent company Chimes International, and executives Martin Lampner and Albert Bussone violated the Employee Retirement Income Security Act when they caused a health and welfare plan established for Chimes DC employees to pay millions of dollars in excessive fees. The fees included those paid to the plan's third-party administrator, FCE Benefits Administrators, Inc. and another company, Benefits Consulting Group.

The lawsuit also alleges that FCE, with the knowledge and participation of principal owners Gary Beckman and Stephen Porter, caused the plan to engage in transactions for their own benefit and exercised control over the plan's contracts with other service providers to increase FCE's compensation through undisclosed commissions and fees. All of these actions are violations of ERISA.

The excessive compensation that the plan paid to FCE and BCG occurred against the backdrop of solicitation by Bussone and Lampner of hundreds of thousands of dollars from FCE and BCG. Bussone and Lampner allegedly solicited FCE and BCG to make donations to The Chimes Foundation, a charitable fundraising arm of Chimes International LTD. Specifically, FCE and BCG jointly pledged $330,000 to the foundation in 2009, and in the pledge noted that an "additional $55,000 will be paid for a one-year option of continuing benefit services to our Chimes partner." Between 2009 and 2014, FCE paid more than $400,000 to The Chimes Foundation while BCG paid at least $282,500. In addition, Lampner solicited FCE to employ his child, and BCG's owner provided discounts to Chimes DC on other non-plan work.

In connection with those payments and other benefits conferred on people and entities associated with Chimes International, FCE and BCG were retained as service providers for the health and welfare plan, a transaction that the department alleges violates federal law. The department's lawsuit contends that FCE, Porter, Beckman, BCG and Ramsey are liable for profits earned as a result.

"It is troubling that service providers in this case allegedly made substantial and ongoing payments to the plan sponsor. But given this information, it is not surprising that the services ultimately provided were overpriced," said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi. "The department will act vigorously to protect plans where the integrity of the service provider selection process is compromised by unlawful payments to plan fiduciaries,"

The lawsuit alleges that FCE received rebates, commissions, and other payments from the plan's trustee as well as the plan's providers of various services, including stop-loss insurance, prescription drug benefits, behavioral health and employee assistance programs, and services related to medical benefits. While Chimes DC and FCE had agreed that most commissions or rebates paid by plan service providers to FCE should be forwarded to the plan, the lawsuit asserts that FCE retained payments and misrepresented to Chimes DC that it had remitted them to the plan. As a result, FCE increased its compensation at the plan's expense and without Chimes DC's authorization.

The department is asking the court to require all defendants to provide an accounting of profits received and to disgorge profits from fiduciary breaches (or knowing participation in fiduciary breaches) and prohibited transactions, and is asking the Chimes defendants and FCE to restore any losses to the plan. In its action, the department is also asking:

• For the removal of FCE, Beckman, Porter, Bussone, Lampner, BCG, and Ramsey as fiduciaries or service providers for any ERISA-covered plan sponsored by Chimes International LTD
• To permanently enjoin FCE, Bussone, Lampner, BCG and Ramsey from acting as fiduciaries or service providers for any plan covered by ERISA
• To appoint an independent fiduciary to manage the Chimes DC Plan