United States District Court, C.D. Illinois, Peoria Division
THOMAS E. PEREZ, Plaintiff,
THOMAS E. LEITER, et al., Defendants.
E. Shadid, Chief U.S. District Judge.
the Court are the Plaintiff's Motion for Partial Summary
Judgment (D. 18) and Supporting Memorandum thereto (D. 19),
the Defendants' Response (D. 27), and the Plaintiff's
Reply (D. 28). For the reasons stated, infra, the
Plaintiff's Motion for Partial Summary Judgment is
GRANTED in part, DENIED in part, and the Court RESERVES
RULING in part.
Plaintiff, Thomas E. Perez, the Secretary of the United
States Department of Labor, brought this action pursuant to
Title I of the Employee Retirement Income Security Act of
1974 (“ERISA”), as amended, 29 U.S.C.
§§ 1001, et seq., ERISA § 502(a)(2)
and (5), 29 U.S.C. § 1132(a)(2) and (5). (D. 1). The
Secretary seeks to enjoin the Defendants, Thomas E. Leiter
and The Leiter Group Attorneys and Counselors Professional
Corporation (“The Leiter Group”), from
“acts and practices which violate the provisions of
Title I of ERISA, to obtain appropriate equitable relief for
breaches of fiduciary duty under ERISA § 409, 29 U.S.C.
§ 1109, and to obtain such further equitable
relief” as appropriate to redress and enforce the
provisions of Title I of ERISA. Id. at pg. 1. The
Plan at issue-a defined contribution profit sharing plan
governed by ERISA- is also a named Defendant, pursuant to
Federal Rule of Civil Procedure 19(a), to ensure complete
relief can be granted. The undisputed facts demonstrate the
Leiter Group is an Illinois professional corporation
providing legal services. Leiter is the president, secretary,
and sole owner of The Leiter Group. The Leiter Group
established the Plan, restating it in 2009 under an adoption
agreement. Leiter signed the adoption agreement as a
representative of The Leiter Group and as the Plan's
appointed trustee. The Leiter Group has been the only
administrator of the Plan during its existence, making Leiter
the sole fiduciary of the Plan. Leiter made all of the
investment decisions for the Plan. Leiter concedes that he
had the discretion to agree to the terms of all of the loans
discussed below, as the discretionary trustee of the Plan.
August 12, 1998, Leiter created the Main-Flora Land Trust
(“Main-Flora Trust”) and appointed himself as
trustee. (D. 19-7 at pg. 2). He had 100% of the beneficial
interest in the trust. Id. The Main-Flora
Trust's only asset is a commercial building located at
427 Main Street, Peoria, Illinois. On January 1, 2010, Leiter
assigned his wife, Barbara K. Leiter, 50% of his beneficial
interest in the Main-Flora Trust. (D. 19-8 at pg. 2).
April 8, 2002, Leiter created Beacon Properties, LLC
(“Beacon”), a Florida limited liability company,
to develop, own, and sell real estate. Leiter is the managing
member and president of Beacon, receiving 100% of its
profits. Beacon's sole asset is a 50% interest in
Hacienda del Mar, LLC (“HDM”), another Florida
limited liability company. Leiter is the president and
manager of HDM, receiving 100% of its profits. Beacon's
and HDM's principal offices are both located at 309-A
Main Street, Peoria, Illinois.
times relevant to this action, Leiter valued the Plan's
investments at their book value. (D. 19-3 at pg. 48). He does
not believe he ever considered valuing the investments in any
other manner. Id. at pg. 50. Leiter admitted,
however, that he knew it was possible to calculate the value
of investments by including their increase and/or loss in
value. Id. at pp. 50-52.
Main-Flora Trust Loans
January 10, 2010, at the direction of Leiter, the Plan made a
$122, 000.00 loan to the Main-Flora Trust, which was
accidentally recorded as going to the Apollo Building Trust.
(D. 19-13 at pg. 2); (D. 19-14 at pg. 2). Under the terms of
the Apollo loan, Leiter agreed that the Main-Flora Trust
would pay the Plan the principal sum at an annual percentage
rate of four percent interest, payable by January 10, 2013.
(D. 19-13 at pg. 2). By 2011, the Main-Flora Trust paid the
Plan $4, 480.00 in interest and $2, 120.00 toward the
principal, resulting in a principal loan balance of $119,
880.00. (D. 19-14 at pg. 2).
executed another promissory note to the Plan, loaning the
Main-Flora Trust $119, 880.00 on January 1, 2011. (D. 19-15
at pg. 2). He agreed that the Main-Flora Trust would pay the
Plan the principal sum, along with an annual percentage rate
of four percent interest, this time payable by January 1,
2014. Id. On January 1, 2014, Leiter loaned the
Main-Flora Trust $134, 265.60 from the Plan. (D. 19-16 at pg.
2). The 2014 Main-Flora Trust loan represented his
calculation of the unpaid principal and interest rolled over
from the 2011 Main-Flora Trust loan. (D. 19 at pg. 9); (D. 27
at pg. 3). Once again, he agreed that the Main-Flora Trust
would pay the Plan the principal sum with an annual
percentage rate of four percent interest. (D. 19-16 at pg.
2). Leiter further promised an annual principal payment of
$5, 000.00. Id. The entire balance was due in full
by January 1, 2017. Under the terms of the 2014 Main-Flora
Trust loan, if the Main-Flora Trust defaulted on a scheduled
payment, the Plan had the option to collect the entire unpaid
balance, along with accrued interest, immediately. (D. 19-16
at pg. 2). Leiter admits that he chose the interest rate
because it was beneficial to the Main-Flora Trust and that he
did not consult with any banks to determine what current
competitive interest rates were. (D. 19 at pg. 10); (D. 27 at
January 1, 2017, after the filing of the instant suit, Leiter
executed another promissory note from the Main-Flora Trust to
the Plan. (D. 19-17 at pg. 2). This loan was for $233, 855.00
and was an explicit renewal of the 2011 Main-Flora Trust
loan, including “accrued interest and
advances[.]” Id. Leiter agreed that the
Main-Flora Trust would pay the Plan an annual percentage rate
of four percent interest, along with a lump sum payment upon
maturity by January 1, 2020.
December 31, 2007, Leiter directed the Plan to loan Beacon
$60, 000.00 at an annual percentage interest rate of eight
percent. (D. 19-18 at pg. 2). All principal and interest was
due on December 31, 2010 and the loan balance could be paid
early without penalty. Id. Leiter was the only
person with authority to enter into agreements on behalf of
Beacon. (D. 19 at pg. 11); (D. 27 at pg. 3). He testified
that he paid the Plan, on behalf of Beacon, an interest
payment of $4, 800.00. (D. 19-3 at pg. 30).
January 1, 2010, Leiter had the Plan loan Beacon $60, 000.00
at an annual percentage interest rate of six percent. (D.
19-19 at pg. 2). Like the 2007 Beacon loan, all principal and
interest was due exactly three years later (on January 1,
2013) and the loan balance could be paid off early without
penalty. Id. Leiter testified that his decision to
lower the interest rate on the 2010 Beacon loan was based on
“market conditions.” (D. 19-3 at pg. 34). He
never demanded payment for the 2010 Beacon loan on behalf of
the Plan. (D. 19 at pg. 12); (D. 27 at pg. 3).
January 1, 2013, Leiter rolled the 2010 Beacon loan into
another loan. (D. 19-20). The 2013 Beacon loan from the Plan
was for $70, 800.00 and had an annual percentage interest
rate of four percent. Id. at pg. 2. The principal
balance represented the balance and accrued interest from the
2010 Beacon loan, and was due, along with its accrued
interest, by January 1, 2016 with no penalty for early
payment. Id.; (D. 19-3 at pg. 36). Leiter based his
decision to lower the interest rate on “current market
conditions.” (D. 19-20 at pg. 37). Beacon did not pay
the loan by January 1, 2016 and the Plan did not request that
Beacon pay the balance it was owed. Id. at pg. 38.
created a limited liability corporation called the Beacon
Properties Florida Waterfront Residential Fund I
(“Fund”) to invest in an HDM project
(“Project”). (D. 19-21 at pg. 4). HDM's
Project was a real estate condominium development in Placida,
Florida. Id. HDM owned the Project and Beacon
developed it. Id. The Fund planned to “invest
in 20% Preferred Equity Investment Units issued by” HDM
and Beacon, which were to be paid for “from
distributable cash from earnings of the Project in preference
to returns to the members of” HDM and Beacon.
Id. The Fund had approximately ten members, one of
which was the Plan. (D. 19-3 at pg. 40). Each of the
Investment Units were “designed to pay a return of 20%
annually on the invested capital payable as a preferred
distribution from” HDM. (D. 19-22 at pg. 2). The Fund