CHICAGO (CN) – A federal grand jury this week accused an executive and part-owner of a nationwide pension plan administrator of defrauding hundreds of public housing authorities of $8.6 million.
Richard Zachmann, 60, was vice president and part-owner of Life Associates Inc., which administers employee pension plans and group life insurance for more than 200 public housing authorities in 25 states, according to the company website.
The U.S. Attorney’s Office said that from 2002 to 2009 Zachmann concealed from clients “that their pension plans and group life insurance programs had received valuable proceeds when the financial company that serviced the plans converted from a mutual holding company, owned by its policyholders, to a publicly traded company through a process known as ‘demutualization.'”
Life Associates partnered with a mutual holding company called Principal Financial Group. According to the indictment, “Without disclosure to the Housing Authorities, defendant Zachmann persuaded Principal to establish a separate expense account from which LAI could withdraw the Pension Plan Demutualization Proceeds, purportedly to offset future expenses that LAI would charge the Housing Authorities and their plan participants.”
Prosecutors claim that Zachmann “converted approximately $8,628,666 in demutualization proceeds to his and his wife’s personal benefit, to the benefit of Life Associates, and to the benefit of other non-related businesses that Zachmann at least partially owned. Zachmann knew that these proceeds were to be used solely for the benefit of the housing authority benefit plans and their beneficiaries.”
If convicted, Zachmann faces up to 20 years in prison on each of 12 counts of wire fraud.