Retirement-funds suit blocked
The firm that handled state workers' funds files for bankruptcy
The state's bid to recover $2.3 million in missing retirement-fund contributions for Hawaii education employees has suffered a blow with a bankruptcy filing by the company that allegedly diverted the money.
Plan Compliance Group, based in Walnut Creek, Calif., filed for Chapter 7 bankruptcy on Dec. 29 in California, citing "severe financial difficulties."
The move automatically blocks a civil lawsuit against the company and its president, Francis W. Reimers, filed last month by state Attorney General Mark Bennett on behalf of the Department of Education, which saw $2.28 million in funds disappear.
The University of Hawaii, which lost $421,000 to the same company, had been poised to join the lawsuit.
"In that respect, (the bankruptcy filing) has a negative impact on our ability to get our money back," said UH General Counsel Walter Kirimitsu.
PCG, which handled the transfer of DOE and UH employee contributions into tax-sheltered annuity funds, failed to make the necessary deposits into the funds in September after deducting the money from employee paychecks.
Bennett's office is studying California law to find out whether it can sue Reimers personally, said Dana Viola, special assistant to the attorney general.
"We want to clarify whether a corporate bankruptcy filing has any ramifications on our ability to go forward on an individual," she said.
However, bankruptcy experts said it seems more likely the state will have to wait for a bankruptcy trustee to investigate the extent of all company-related assets and distribute them to creditors.
A Chapter 7 filing is essentially a liquidation of company assets to pay off debts. In its filing, Plan Compliance Group estimated its assets at less than $500,000.
"It's unlikely the state will recover anything close to the money that (PCG) collected," said Chuck Choi, a Honolulu bankruptcy attorney.
Both the DOE and UH have reimbursed their affected employees, estimated at more than 10,000.
Several mainland schools districts had filed similar suits against PCG. Some said Reimers told them the problem stemmed from an unexpected levy by the Internal Revenue Service that sent PCG into financial crisis.
The U.S. Bankruptcy Court for Northern California has set a meeting of PCG creditors for Jan. 31 in Oakland.