Block on Trump's Asylum Ban Upheld by Supreme Court
City National Corporation is liable for more than $7.3 million for self-dealing by administering its own retirement plan, a federal appeals court said.
The U.S. Ninth Circuit Court of Appeals affirmed the judgment against the bank in Acosta v. City National Corporation. A trial court had decided the bank violated employee retirement laws to collect unchecked, unreasonably high fees. The bank appealed, and may challenge the appellate ruling. In the meantime, the Ninth Circuit sent the case back to the trial judge to recalculate interest.
That's Real Money: $7,367,382, Plus Interest
Bloomberg says City National Corporation operates as the bank holding company for City National Bank, which provides banking, investment, and trust services to small to mid-sized businesses, entrepreneurs, professionals, and affluent individuals. In the self-dealing case, City National was also operating as a plan administrator in violation of the Employee Retirement Income Security Act. The Department of Labor's Employee Benefits Security Administration found that through the end of 2011, plan fiduciaries and affiliates received millions of dollars in compensation, commission, and fees at the expense of the plan. Judge Terry Hatter, Jr. found City National liable on summary judgment.
On appeal, the bank argued that it was exempt from liability for "reasonable compensation" under ERISA Section 408(c)(2). The Ninth circuit rejected the argument, saying the bank engaged in a prohibited transaction. "In other words, while a plan may pay a fiduciary 'reasonable compensation for services rendered' under (section 408), the fiduciary may not engage in self-dealing under (section 406(b) by paying itself from plan funds," the opinion says.
The Ninth Circuit said the loss was at least "the entire cost of the prohibited transaction." That includes the total amount of illegal compensation. City National argued that it was entitled to offsets, but the appeals court disagreed. The judges said no reasonable jury could find in favor of City National given the paucity of the evidence.
However, the appeals panel said the trial court erred in calculating interest on the gross instead of the net compensation and remanded the case for further calculations.