Compliance January 6, 2023

Professional Athlete Sports Agency Is Accused of Retirement Asset Theft

The Department of Labor alleges that a Houston sports agency used retirement assets to operate the company.

Reported by

The co-owner of Professional Sports Planning, Inc. and trustee for the Professional Sports Planning, Inc. defined contribution profit sharing plan, Carl Poston, is alleged to have committed theft of workers’ retirement plan assets.

U.S. Secretary of Labor Marty Walsh brought a civil lawsuit before the United States District Court for the Southern District of Texas, under the Employee Retirement Income Security Act, that alleges five counts of fiduciary breach, according to the complaint, Walsh v. Poston et al.

The Houston-based business providing representation and negotiation services for professional athletes, Professional Sports Planning, did not respond to a request for comment.

“During the period from on or about October 17, 2014, through on or about May 21, 2018, defendants Carl Cardwell Poston III and Professional Sports Planning, Inc., obtained, retained, and used plan assets for non-plan uses, including funding the operation of Professional Sports Planning, Inc,” the complaint stated. “Specifically, defendant Carl Cardwell Poston, III directed the withdrawal of plan assets to be used for operating the company.”

The five ERISA violations are:

  • failing to operate the retirement plan solely in the best interests of participants;
  • Failing to operate the plan with necessary care, skill, prudence and diligence;
  • Engaging in transactions plan fiduciaries knew or should have known were violations of ERISA;
  • Dealing with assets of the plan in their own interests or for their own accounts; and
  • Engaging in transactions involving the plan on behalf of a party whose interests were adverse to the interests of the trust and the interests of its participants and beneficiaries.


“The fiduciaries’ violations resulted in the following plan losses: (1) $111,414.10 in plan assets that were withdrawn between October 17, 2014, and May 21, 2018, for non-plan purposes,” the complaint stated. “The fiduciaries have restored a portion of these withdrawn assets, and the remaining amount owed to the plan is $76,768.45, and (2) [l]ost opportunity costs that cannot be calculated until the plan assets are restored and distributed to the participants.”

The Department of Labor website includes a description for the types of retirement plans, under which it defines a profit-sharing plan as a defined contribution plan wherein the plan “may provide, or the employer may determine, annually, how much will be contributed to the plan (out of profits or otherwise).”

Named defendants to the lawsuit are Poston, a longtime agent representing professional football and basketball players, and his company, Professional Sports Planning, Inc., as well as the Professional Sports Planning, Inc. profit sharing plan.

“As the functional plan administrator and a trustee, Carl Cardwell Poston III had and exercised discretionary authority control and responsibility over plan management and administration and had actual control over plan assets, including, but not limited to, determining the disposition of plan assets,” the complaint stated.

The complaint argued that the fiduciary violations comprise legal exposure for both direct liability and co-fiduciary liability.

The plaintiff is represented by Amy Hairston, trial attorney-in-charge and the Department of Labor Office of the Solicitor. It is unclear at this time who is representing Poston.

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Compliance January 5, 2023

Texas Area Counseling Service Found Exempt from 403(b) ERISA Requirements

The service was found to be in a legal safe harbor, but the case continues against the plan adviser.

Reported by

In December 2020, Robert Roton and Jacqueline Juarez filed a complaint in the U.S. District Court for the Northern District of Texas against their employer, Legacy Counseling Center, Inc.—a mental health center that provides counseling for people with HIV and treatment for substance addiction—and the plan’s manager, Peveto Financial Group, LLC. Both businesses are based in Texas.

The court filed a partial order on December 29, 2022, ruling on summary judgment motions from both defendants. District Judge Brantley Starr ruled that the plaintiffs have standing to bring the suit, but Legacy is exempt from the ERISA requirements in this case. Peveto, on the other hand, cannot be held liable for IRS corrective damages, yet can still be held liable for not permitting wider plan participation if they are found to be a fiduciary.

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The 2020 suit alleged that Legacy sponsored a 403(b) plan managed by Peveto Financial but only permitted “high-level” employees to participate, denying the opportunity to “rank-and-file” employees. The suit alleged that this violated the “universal availability” rule found in Internal Revenue Code 403(b)(12)(A)(ii). The plaintiffs alleged that they have a right to participate in the plan, and this participation opportunity must be offered at least once per year to employees who work 20 or more hours per week.

According to the initial filing, Roton lost out on $231,500, and Juarez lost $58,347.17 in hypothetical contributions and IRS mandatory corrective earnings to offset opportunity cost from lost investment revenue.

Peveto had argued that the plaintiffs did not have standing because recovery of this kind can only be for a plan itself, not for individual participants. Starr rejected this argument and said that standard would only apply for a defined benefit plan, not a defined contribution plan, because DC plans are invested on an employees’ behalf at the employees’ risk.

Peveto also argued that IRS corrective payments are extra-contractual damages, and Starr agreed that these payments are an administrative correction done voluntarily to avoid IRS penalties, not a remedy guaranteed by law.

Legacy argued that it should be exempt from the ERISA violations alleged, and Starr agreed. An employer is exempt from ERISA requirements related to a 403(b) plan if it meets certain criteria, including: participation in the plan is voluntary; employer involvement the products available to participants; and the employer receives no compensation except that which is used to offset the costs associated with payroll deducting.

The court found that Legacy was indeed in a safe harbor, based on these criteria.

Peveto asserted it was not a plan fiduciary and merely provided investment advice, and was therefore also not liable under ERISA. In a motion for summary judgment, facts must be read in the light most favorable to the other party, in this case the plaintiffs. Starr found that there was a factual dispute, and one-on-one consultations with participants. Peveto also collected a fee every time a participant enrolled. Since these facts are contested, the case must continue for Peveto.

The two defendants, Peveto and Legacy, also did not agree on who administered the plan, which Starr’s ruling called a game of “high stakes hot potato.” Since Legacy is in a safe harbor, it would not necessarily matter if it was responsible for administration, but since Peveto is not, administrative responsibility could suggest it was, in fact, a fiduciary and therefore liable under ERISA.

Starr did not rule on Peveto’s fiduciary status, only ruling that there is a dispute to be adjudicated at a later point.

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