DOL nails advisor for ERISA violationsNews added by Benefits Pro on April 16, 2014

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By Paula Aven Gladych

An Iowa-based investment advisor is being forced to repay $341,487 to 68 pension plans he and his company worked with from May 2007 through November 2011.

An investigation by the Department of Labor’s Employee Benefits Security Administration found that Donald Gene DeWaay Jr., entities he owns and former employees violated the Employee Retirement Income Security Act when they recommended certain investments to clients participating in ERISA-covered employee benefits plans.

The EBSA also found that DeWaay’s companies and advisors charged higher fees than those agreed to by their clients. Recommendations made to clients also resulted in DeWaay, his companies and former employees receiving commissions from third parties.

Under the settlement agreement with the DOL, DeWaay has agreed to pay up to an additional $212,727 over the next five years to other ERISA plans he managed.

"The law clearly states that an advisor who accepts a fee to give investment advice to a retirement plan must act solely in the best interests of plan participants," said Assistant Secretary of Labor for Employee Benefits Security Phyllis Borzi. "By ignoring the best interests of those participants, the defendants in this case didn't simply violate the law; they violated the faith of conscientious workers who trusted DeWaay and his employees to help them prepare for a secure retirement."

DeWaay owns or owned three companies based in Johnston, Iowa: DeWaay Capital Management Inc., an investment advisory firm; DeWaay Benefit Administrators LLC, an employee benefit plan administrator and DeWaay Financial Network LLC, a now defunct full-service brokerage company.

Under the terms of the settlement, DeWaay and four investment advisors he employed Joshua Cross, Paul Espey, Andrew Kleis and Brenton Collins, have agreed moving forward to disclose to ERISA plan clients whether they will act as fiduciaries to those plans. The investment advisors and companies will also provide their ERISA plan clients a description of all compensation and fees received, in any form, from any source, involving any investment or transaction related to them.

They also agreed that either they will not collect commissions from third parties or, if they do, will refund 100 percent to their ERISA plan clients. DeWaay also agreed to be removed as trustee of the DeWaay and Associates Inc. 401(k) Profit Sharing Plan, and to no longer serve or act as a fiduciary or service provider to the plan.

The investigation was part of the EBSA’s Fiduciary Service Provider Compensation Project, which focuses on the receipt of improper or undisclosed compensation by employee benefit plan consultants and other investment advisors.

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