Clients’ accounts could be out $8M
Sewickley adviser is target of theft lawsuit
Federal investigators are trying to determine what happened to at least $8 million alleged to have been embezzled by a financial adviser in Sewickley from hundreds of retirement and profit-sharing accounts held by church groups, doctors and small businesses.
The U.S. Department of Labor is seeking a temporary restraining order to remove Paul Palguta, owner of RiversEdge Advanced Retirement Solutions LLC, as administrator of his business and to appoint AMI Benefit Plan Administrators Inc., of Youngstown, Ohio, as an independent fiduciary. U.S. District Judge Marilyn Horan in Pittsburgh is overseeing the case.
Mr. Palguta could not be reached for comment and RiversEdge’s office had a pre-recorded message directing questions to its plan sponsors. Mr. Palguta’s attorney, Michael A. Comber, a partner at the Downtown law firm of Comber Miller LLC, declined to comment on the case Friday.
RiversEdge was founded in 2009, and Mr. Palguta, who authorities said controlled at least 240 retirement plans, was described in an online profile as a 25-year veteran of the retirement services industry.
The Labor Department’s Employee Benefits Security Administration is heading up the investigation while the department pursues a lawsuit against Mr. Palguta and RiversEdge that alleges money was shifted among accounts to cover shortfalls and statements were fabricated to mask unauthorized withdrawals. The lawsuit is seeking removal of Mr. Palguta from controlling the funds, restoration of plan losses and civil penalties.
Since at least 2017, the lawsuit alleges, money from the retirement and profit-sharing accounts was drained into a RiversEdge bank account without any money being returned to client accounts. The lawsuit also alleges that the embezzlement has accelerated since November, with at least $1.8 million embezzled since then and many of the improper transfers falling under $25,000 to avoid scrutiny.
A dentist office in Hawaii, an apple farm in Virginia, a small family medicine practice in Virginia, Christian church groups and operators of a hazardous waste landfill in Westmoreland County are among the clients that had retirement or profit-sharing accounts at RiversEdge. The Labor Department has asked Judge Horan to freeze 17 of those accounts until their integrity can be assured.
Among the accounts that were requested to be frozen was a profit-sharing plan by Downtown law firm Leech Tishman Fuscaldo & Lampl LLC, a 401(k) plan for Hawaiian Island Dental Inc., a 401(k) savings plan for Max Environmental Technologies Inc., which operates hazardous waste landfills in Westmoreland County, and even RiversEdge’s own 401(k) profit sharing plan, which had suspicious transactions, according to court records.
A RiversEdge client in Greensburg managed to get the company to make up a shortfall of more than $5 million that was discovered in 2021 and 2022.
By last March, RiversEdge statements showed a shortfall of more than $5 million in a 401(k) savings plan for W.N. Tuscano Agency. RiversEdge was serving as a third-party administrator for the plan and Susan Crary, vice president of finance at the insurance agency, asked Mr. Palguta to explain the missing money.
He told her it was due to a “system trading error,” according to court records.
Tuscano then ended its relationship with RiversEdge, which then returned the $5 million. Ms. Crary did not return calls for comment Friday.
The Labor Department alleges money for the repayment was simply shifted from other client accounts.
In cases of improper losses to retirement plans, the federal government requires plan sponsors to have bonds to cover at least 10% of plan assets, but coverage could be higher, according to Dan Tatomir, vice president of retirement plan advisers at Fragasso Financial Advisors, who is not involved in the RiversEdge case.
Also named as defendants in the case were American Trust Custody, Schwab Retirement Technologies Inc. and Charles Schwab Trust Bank, companies that handled RiverEdge’s funds but were not implicated in any wrongdoing.
Kris B. Mamula: kmamula@post-gazette.com