Two years after they were forced to liquidate their company, owners of a now-defunct builder in Tennessee are still answering for their liabilities.
Last week, the Department of Labor (DOL) filed a civil complaint with U.S. District Court in Nashville against Corinthian Custom Homes and three of its principals. The suit alleges that the builder—which began liquidating its assets in June 2008 after filing for bankruptcy protection from creditors five months earlier—mishandled its employees’ contributions to Corinthian’s 401(k) retirement plan, which the builder established in early 2005.
The three principals—Nicholas Psillas, who was Corinthian’s president; his wife Deborah, and Richard DePriest—were identified as administrators, trustees, and fiduciaries of that plan. DOL alleges that they failed to remit contributions deducted from participant-employees’ paychecks in the years 2005 through 2007 and that they commingled those contributions with Corinthian’s general assets, which violated codes within the Employee Retirement Income Security Act (ERISA).
As a result, DOL alleges that the plan incurred losses of $100,248.96 from missed employee contributions and lost earnings of $13,036.16 due to the lack of investing those contributions. (In 2006, the latest year for information that was available, the plan had 42 participants, according to DOL.)
The department wants the court to order the defendants—who at presstime had yet to select an attorney for representation—to restore all losses, including interest, and “lost opportunity costs.” It also wants the court to appoint a successor fiduciary. The defendants must respond within 21 days of the Nov. 4 complaint filing.
BUILDER was unable at presstime to ascertain what prompted DOL’s suit against a builder that owed its creditors $17 million when it started liquidating its assets. DOL’s attorney in this case, Yasmin Kimberly Yantas-Bailey, did not return a phone call to her office.
But Gloria Della, a Department of Labor spokesperson, tells BUILDER that investigations of this nature can go on for a year or more before they get turned over to the DOL’s legal team. Della also notes that DOL named Corinthian’s principals as defendants in its complaint because it is more likely to be able to retrieve money from individuals than from a now-defunct business.
The complaint against Corinthian was one of 24 enforcement actions that DOL’s Employee Benefits Security Administration filed recently “to protect more than $7 million for workers in retirement plans or health plans that ERISA governs,” the department stated on Tuesday. These actions “underscore the Labor Department’s commitment to ensure that these workers’ contributions are protected and available to pay future benefits,” stated Labor Secretary Hilda Solis. Della adds that these cases are meant to show how the department’s enforcement arm, which has been active since the mid 1990s, is “revitalized.”
Corinthian Custom Homes opened for business in 2002, according to various news reports. By the time it filed bankruptcy under Chapter 11 in February 2008, it had about 65 homes in various stages of construction and owned at least 179 lots. When the builder initiated liquidation proceedings, most of Corinthian’s land had been foreclosed on, although some had already been sold to developers.
Psillas also liquidated his Premier Development Company, which had declared bankruptcy in March 2008. He could not be located for comment.
John Caulfield is senior editor for BUILDER magazine.