Department of Labor files suit after investigation finds fringe benefit plan fiduciaries misused millions of dollars to pay employer expenses

GREENBELT, MD – The U.S. Department of Labor today filed suit in the U.S. District Court for the Southern Division of the District of Maryland against a company that allegedly mismanaged fringe benefits owed to employees working for at least 54 government service contractors across the United States. 

The suit alleges that Axim Fringe Solutions Group, LLC, its majority owner James Campbell and its Director of Compliance Accounting Melissa McManes violated the Employee Retirement Income Security Act of 1974 by misusing millions of dollars taken from ERISA fringe benefit plans – assets that were owed to its clients’ employees – to pay expenses of their government contractor clients. 

The McNamara O’Hara Service Contract Act of 1965 requires Axim’s clients, who are government service contractors, to pay their employees who work on certain federal service contracts a minimum amount of wages and fringe benefits. U.S. Department of Labor Employee Benefits Security Administration investigators found Axim, Campbell and McManes violated the law by charging clients’ employees for the administrative costs of their own fringe benefits instead of the employers, who are required by law to pay those costs.

The investigation also found that Axim, Campbell and McManes misappropriated more than $5 million in payments from their clients’ employees by transferring fringe benefit contributions from the employee trust accounts to the Axim operating account. The department alleges that these unexplained transfers from the trust accounts have delayed payments of health insurance premiums, leading some insurers to issue late payment notices. 

“Plan fiduciaries are required to act in the best interests of plan participants and their beneficiaries – not in their own or employers’ best interest,” said Employee Benefits Security Administration Deputy Regional Director Norman Jackson in Philadelphia. “In this case, Axim Fringe Solutions Group’s actions have endangered the health coverage of workers across the United States. The Department of Labor is committed to ensuring plan participants and beneficiaries receive the benefits they have earned.” 

“The Department of Labor will not hesitate to litigate against fiduciaries who misappropriate plan assets,” said Acting Regional Solicitor Samantha Thomas. “Fiduciaries may not use ERISA plan assets to pay employers’ expenses, and those who do so should expect to face enforcement actions.” 

The suit asks that the court appoint an independent fiduciary to administer the benefit plans and for the defendants to restore all losses, including interest, resulting from their fiduciary breaches. The department also seeks to permanently bar Axim, Campbell and McManes from ever acting as fiduciaries or service providers to any benefit plan covered by Title I of ERISA.