DOL Lawsuit Alleges TPA Stole $5.5M in Retirement Plan Assets From 17 Clients

Updated with correction.

The Department of Labor has sued Paul Palguta, the owner and president, of RiversEdge Advanced Retirement Solutions LLC—a third-party retirement plan administrator—for allegedly stealing assets from retirement plans.  

RiversEdge’s retirement plan clients—which include plans governed by the Employee Retirement Income Security Act and some that are not—enter into agreements with the firm, allowing Palguta and others at Sewickley, Pennsylvania-based RiversEdge to execute trades and direct the disposition of the plan’s assets, according to the complaint filed January 26.

Starting in January 2017, “RiversEdge made multiple transfers of plan assets from the #RERREBTE account [a corporate custody account which can only hold cash awaiting further disbursement instructions as entered by authorized RiversEdge personnel] at [Mid Atlantic Trust Company] to an account at PNC Bank for FBO RiversEdge Advanced Retirement Solutions,” the complaint states. “RiversEdge made no transfers from the PNC account back to any account at [MATC].”

The lawsuit, Julie Su, U.S. Department of Labor v. RiversEdge Advanced Retirement Solutions LLC et al., follows an investigation by the DOL’s Employee Benefits Security Administration.

EBSA “determined [Palguta] and the company had transferred at least $5.5 million in ERISA and non-ERISA plan assets from the #RERREBTE account to PNC Bank from October 2022 through January 2024,” the DOL complaint states.

According to the DOL filing, the U.S. Department of Justice earlier this month “issued preservation letters to MATC and PNC asking them to freeze RiversEdge’s accounts because they likely contained proceeds of a crime. While DOJ is in the process of obtaining a final warrant to freeze the accounts, they have not notified the DOL of having obtained such a warrant yet.”

Additionally, “EBSA found that RiversEdge also services at least 170 plans that have assets held by Schwab on a custodial basis. EBSA has not been able to confirm whether Schwab has terminated RiversEdge’s or Palguta’s access to these accounts.”

Following the hearing on January 29, Schwab confirmed it has terminated RiversEdge’s and Palguta’s access to accounts custodied at Charles Schwab Trust Bank.

The DOL requested a court order removing RiversEdge and Palguta from serving as fiduciaries and service providers of the plans they administer and appointing an independent fiduciary to secure plan records, assist with recordkeeping transition activities and perform an accounting of suspicious asset transfers.

The U.S. District Court for the Western District of Pennsylvania, in which the DOL’s case is filed, heard a motion seeking a restraining order on January 29 and another hearing is scheduled for February 1.

The order lists 17 client plans, including 401(k), 403(b), deferred compensation and profit-sharing plans, for which a court-appointed independent fiduciary should conduct an accounting of the assets.

The order seeks to prevent “irreparable injury” and prevent “harm to the Client Plans caused by the RiversEdge Defendants’ breach of their fiduciary duties, responsibilities, and obligations to the Client Plans, which includes misuse of the Client Plans’ assets. The order is sought “to stop the payment of the Client Plans’ assets to the RiversEdge Defendants and to stop the transfer of funds to other plan accounts,” a court document states.

The order also explains that Mid Atlantic Trust Company, doing business as American Trust Custody, and Schwab were included in the lawsuit, the docket shows, to ensure that the plaintiffs can collaborate with the companies as the case proceeds, a status known as being a Rule 19 defendant.

“The Acting Secretary has alleged no claims against the Rule 19(a) Defendants in its complaint,” the restraining order says. The firms “are named as … defendants for purposes of this Order so that the Department of Labor, the Independent Fiduciary and the Rule 19(a) Defendants can work cooperatively to assist the Client Plans.”

American Trust Custody is the custodian of assets for several of the ERISA plans in the lawsuit. Schwab Retirement Technologies Inc. is a software licensor and data hosting provider for many of the ERISA plans. Charles Schwab Trust Bank is a custodian of assets for ERISA plans. Each was named a defendant under Rule 19 of the Federal Rules of Civil Procedure.

The custodians for RiversEdge’s clients hold the assets for the retirement plans in trust accounts controlled by the plan’s sponsor and by RiversEdge as the plan sponsor’s agent. American Trust has separate contracts with each plan, and each contract appoints RiversEdge as the agent for the plan, authorizing American Trust to take instructions from RiversEdge on trade, cash activity and tax reporting.  

A representatives of Charles Schwab responded with the following statement: “At the DOL’s request, Charles Schwab Trust Bank and Schwab Retirement Technologies are continuing to provide trust/custody and technology services to support the impacted retirement plans. Importantly, the DOL has found no evidence that plan assets custodied at Charles Schwab Trust Bank have been impacted in this matter, and Schwab is not accused of any wrongdoing.”

American Trust Custody published a press release on January 26 explaining that the DOL’s lawsuit listed the company and Schwab as Rule 19 defendants.

Chris Broussard, the chief marketing officer for EdgeCo Holdings LP, the parent company of American Trust Custody, referred a request for comment to the DOL’s restraining order.

Representatives of the DOL did not respond to a request for comment.

Representatives of RiversEdge did not respond to a request for comment.