The Tenth Circuit has weighed in on who might be held responsible for theft of assets from an ERISA plan in addition to the thieving fiduciary. The case, Coldesina, D.D.S. P.C. Employee Profit Sharing Plan and Trust v. Simper, involved an investment advisor who embezzled plan assets under his control. When the dentist/plan sponsor became dissatisfied with the plan's investments, he asked the advisor to turn over the plan's account documentation. On the day he was supposed to turn over the documents, the advisor committed suicide, leaving a note that confessed his embezzlement. The dentist sued estate of the advisor, certain companies for whom the advisor was an agent or broker/dealer (KCL and Sunset), and an accountant (and his company) who provided administrative services to the plan.
The Tenth Circuit ruled that the accountant was a fiduciary because he accepted plan contributions into his business account and then wrote checks to one of the advisor's companies. Initially, the accountant wrote the checks payable to KCL. The dentist was apparently aware that the checks were being paid to KCL but there were no explicit plan policies covering the accountant's check-writing activities. Later, without the dentist's knowledge, the advisor directed the accountant to make the checks payable to Greystone Marketing, a company owed by the advisor. The accountant was thus not acting at the plan's direction but using his own judgment to follow the advisor's instructions. This made the accountant a fiduciary subject to ERISA's fiduciary rules and exposed him to potential liability for the plan's losses.
The court then turned to the issue of whether the dentist's state law claims against KCL and Sunset were preempted. The advisor had encouraged the plan to buy investment products sold by these companies and, indeed, the advisor's recommendations were almost entirely limited to products sold by KCL and Sunset. The court ruled that KCL and Sunset had an independent state law duty to the plan to supervise the advisor (a negligent supervision claim) that was not preempted by ERISA. A vicarious liability claim, however, was preempted. The difference for the court seemed to be that negligent supervision claim was not based on the advisor's behavior, but the behavior of KCL and Sunset.
