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Schnader Harrison used severance funds to fund operations, pay equity partners, and file lawsuits.
A bankrupt law firm is accused in a lawsuit of commingling contributions to the firm’s 401(k) plan with the firm’s general assets for months at a time and using the funds to distribute to equity partners. . (Image from Shutterstock)
Defunct law firm Schnader, Harrison, Segal & Lewis commingled contributions to the company’s 401(k) plan with the company’s general assets for months at a time and used the funds to distribute to equity partners. He is accused in a lawsuit of doing so.
A Feb. 7 lawsuit by former non-equity partner Joe Bennett alleges that even though the terms of the plan required Schnader Harrison to pay employer contributions, the non-equity partners and their attorneys They allege they were asked to defer a portion of their compensation to fund their retirement and savings plans.
The deferred compensation was deducted from retirement and savings plans for up to 18 months at a time, according to the lawsuit. The Philadelphia-based company used the funds to fund operations and distribute them to equity partners, in violation of the Employee Retirement Income Security Act of 1974, according to the complaint.
Law360, Reuters and Law.com are reporting on the lawsuit, filed in the U.S. District Court for the Eastern District of Pennsylvania.
Schnader-Harrison failed to incorporate the deferred compensation into the plan immediately, even though it was deducted from his paycheck, according to the complaint. Instead, contributions deducted from monthly paychecks in a given year were not deposited into the retirement plan until September of the following year.
The complaint said it cites information and belief that in 2022, when Schnader Harrison experienced a significant decline in operating revenues, the equity partners were not required to contribute and continued to receive periodic distributions.
According to the complaint, the clearing partner notified the non-equity partners in September 2023 that the deferred compensation would not be deposited into the retirement plan due to insufficient funds. As a result, his deferred compensation for 2022 and 2023 was not credited to the plan.
Mr. Bennett’s proposed class action lawsuit seeks to represent retirement plan participants who were not former equity partners of the firm, as well as pension plan participants’ beneficiaries.
The lawsuit seeks a judgment that the plan fiduciaries breached their fiduciary duties, an accounting of the funds, additional fees to the defendants for investment losses, and a constructive trust for employee contributions not yet deposited into the retirement plans. ing.
Mr. Bennett worked at Schnader Harrison from 2016 until mid-January 2023, when Schnader Harrison announced that it would close in August 2023.
Bennett is currently an attorney at Culhane, Meadows, Hoan & Walsh, where he serves as Labor and Employment Committee Chair.
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