LOS ANGELES (CN) - A benefits administrator embezzled $628,000 from a teachers' pension fund, and still owes $264,000 of it, a children's charity claims in court.
The Chime Institute for Children With Special Needs sued Columbine Employee Benefits dba Benefits Administrators & Consultants, its president Emily Strunk aka Emily R. Stone, and Life Insurance of the Southwest, in Federal Court.
Columbine and Strunk are based in Colorado, the insurer in Texas.
Chime runs a K-8 school in Woodland Hills to give "special needs children access to integrated education," according to the complaint. Its co-plaintiff Michele Haney is the trustee of Chime's defined benefit plan and trust.
Chime claims Strunk embezzled more than $628,000 from the pension plan by forging documents to list herself as the trustee, made at least 10 lump-sum withdrawals from the plan, and transferred money from the plan to defendant Benefits Administrators & Consultant's trust.
Its board of directors voted in 2003 to offer its teachers a trust and benefit retirement plan through defendant Life Insurance of the Southwest (LSW) instead of Social Security, according to the lawsuit.
Chime says its board hired Strunk and her company, Benefits Administrators & Consultants (BAC), to oversee the plan.
Though Strunk served as the plan's administrator, Chime says, she had no control over the employees' pension funds and no authority to withdraw money from the account. Chime claims her duties were to communicate with Life Insurance of the Southwest and (nonparty) Peggy Berrenson, the plan's trustee, about paying out benefits to Chime's employees.
"However, beginning in or around 2009 or 2010, unbeknownst to plaintiff, Strunk and BAC began communicating directly with LSW without including plaintiffs in the communication," the complaint states.
About a year later, Chime claims, a school administrator discovered that more than $628,000 was missing from the pension plan. Chime investigated and asked Strunk to explain the discrepancy, but she never did, according to the complaint.
Since Strunk and Benefits Administrators were uncooperative, Chime says, it told Life Insurance of the Southwest about the problem and learned that "there had been lump sum withdrawals from the LSW annuity not attributed to any participant that were being 'held' in a BAC Trust account that plaintiffs were unaware existed. On inquiry, Strunk advised Chime and the Trust that this was being done for 'plan liquidation requirement' per the Pension Protection Act. At that time, Chime requested that Strunk and LSW provide a copy of any Chime board approval for this BAC Trust Account as there were no records or copies of such document. No such document was ever provided by Strunk or BAC," the complaint states.
Chime claims Strunk made more than 10 unauthorized requests to Life Insurance of the Southwest for lump some payments, and multiple transfers from the pension plan to the BAC trust, supposedly "for the benefit of certain Chime employees," but kept all the money for herself and Benefits Administrators.
Chime demanded an accounting from Strunk and Benefits Administrators, and when they failed to comply, it terminated its contract with them effective July 24, 2012, the complaint states.
The day before the contract officially ended, Strunk emailed Chime several documents. "Many of these documents had been created and/or altered by Strunk to contain her signature and to identify her as a trustee of the Trust and/or the LSW policy, and to give her the power to withdraw money from the plan for her own purposes. Chime and the Trust were unaware of the fraudulent documents and the changes contained therein, and never authorized same," the lawsuit states.
Chime claims it confronted Strunk about the missing money, and that she and Benefits Administrators returned $358,196.87 to the plan.
"However, this is not the entire amount taken from plaintiffs by Strunk and BAC and, to date, in excess of $264,000 remains missing from the plan," the complaint states.
Chime also claims Life Insurance of the Southwest breached contract by issuing payments to Strunk despite knowing that Berrenson was the only authorized signatory on the account. And it claims Life Insurance wrongfully concealed the lump sum withdrawals Strunk made from the pension plan.
Chime seeks $264,000 plus punitive damages for breach of contract, fraud, conversion, unjust enrichment and RICO fraud.
It is represented by Ilene Kurtzman of Calabasas.
Benefits Administrators & Consultants declined to comment on the allegations.
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