Construction Company Lawsuit Targets Its Retirement Plan Providers

A construction management company that sponsors retirement plans has has filed a lawsuit against providers to the company defined benefit and 401(k) profit sharing plans. The case is Martone Construction Management Inc. et al v. Thomas F. Barrett, Inc. D/B/A National Employers Retirement Trust et al.

The plan sponsor sued administrator National Employers Retirement Trust and the other providers for harm to participant’s retirement assets and for having caused the retirement plans to incur market loses, the complaint argued.

“As a result of NERT defendants’ actions, plaintiff and the plans have been injured, including in that the plans have paid fees for services they did not receive, the plans suffered investment losses and loss of value, and plan funds have been depleted,” according to the complaint. “NERT Defendants manifested a knowing and reckless indifference toward, and disregard of, the rights of the plans and participants and beneficiaries, entitling plaintiff to an award of punitive damages.”

A Sandy Spring Bank spokesperson declined to comment on the litigation. Requests for comment to National Employers Trust and Acorn Financial Advisory Services were not returned.  

Sandy Spring Bank served as the directed trustee for NERT and Acorn Financial Advisory Services the investment advisor to NERT, the court filing shows.

The suit contends that NERT informed Mike Martone, president, at Martone Inc. in February 2020 that the administrator had been charging investment fees to the plans in the amount of 0.85% of the plan’s assets. The investment fees had not been listed on any of the invoices sent to Martone from the inception of the provider relationship—as required by the Department of Labor’s Employee Benefits Security Administration, plaintiffs alleged.

“The NERT defendants charged investment fees to the plans, when no investment advisory services or other services were provided beyond those that appeared on the NERT administrator’s invoices and such fees were not timely and properly disclosed as required,” states the complaint. “Martone reasonably believed that the only fees the plans paid were those that appeared on the invoices sent by NERT administrator, and the NERT defendants did not display any investment fees on any of the plans’ statements. Martone did not know that NERT defendants failed to make disclosures of investment fees or any other fees that were purportedly charged.”

The plaintiff’s complaint asked that the court order NERT to refund the investment fees that were charged to participant’s accounts, which Martone estimated to be approximately $350,000 to  $400,000, according to the complaint.

Martone also sued NERT because the administrator ignored the requests and failed to transfer funds from the defined benefit plan—which harmed participants accumulated retirement assets and caused the plan to incur market losses because of the decrease in value of plan assets and improper payments out of plan assets, argued attorneys for the plaintiff in the filing.

In late February 2020 when the market “was in volatile decline,” according to the lawsuit, Martone instructed NERT to trade selected investment funds, but the administrator ignored the instruction. By the following Friday, March 6, the administrator still had not responded to Martone’s instruction, according to the compliant.

Martone again contacted NERT on Monday, March 9, 2020, and requested the trade [and] again NERT defendants did not make the trade, because NERT told Martone that the defendant only conducted trades on Wednesdays, the plaintiff claimed.

The defendants’ failure to execute the trades that Martone requested caused the plans a loss as shown on NERT’s website that totaled $391,904 by March 10, 2020, $674,709 by March 11, 2020, and almost $800,000 by March 15, 2020, according to the lawsuit.

Martone was unable to check the Plans’ account on March 12-13, 2020, because NERT’s website was not working properly those days, according to the complaint.

In addition, the plaintiffs complaint argued NERT failed to facilitate, communicate or allow Martone and the plan to fully invest in and participate in the market, although the plan did include a self-directed Key Advisor account through TD Ameritrade.

“NERT has a self-directed Key Advisor account through TD Ameritrade, which would have allowed Martone the ability to control its own trades and provided additional access to NERT Advisors’ services,” according to the complaint. “NERT defendants did not inform Martone that this service was available prior to February 2020, and when Mr. Martone asked to register for this account NERT administrator ignored his requests.”

The lawsuit was brought before United States District Court for the District of Maryland Southern Division.

Martone Construction Inc. is based in Narragansett, Rhode Island; National Employers Retirement Trust is headquartered in Bethesda Maryland; Acorn Financial Services is based in Reston, Virginia; and Sandy Spring Bank is based in Olney, Maryland.

The plaintiff is represented in court by attorneys from law firm Hugh Blackwell LLP, based in Washington, D.C.