Nonprofit Headed to Trial Over Ex-CEO’s Retirement Benefits

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By Carmen Castro-Pagan

Oct. 19 — Young Adult Institute Inc., a nonprofit corporation that provides services to disabled individuals, is headed to trial over accusations that it violated ERISA when it stopped paying retirement benefits to its former chief executive officer and his wife ( Levy v. Young Adult Inst., Inc. , S.D.N.Y., No. 1:13-cv-02861, 10/18/16 ).

Judge J. Paul Oetken of the U.S. District Court for the Southern District of New York on Oct. 18 denied in part YAI’s motion for summary judgment, holding that YAI can’t avoid liability under the Employee Retirement Income Security Act for defaulting on the payment of Joel M. Levy’s retirement benefits. YAI had no excuse for failing to pay Levy’s benefits, the judge said.

However, because questions of fact remain related to which agreement prevails—a 2005 original agreement that granted more benefits to Levy and his wife or a later agreement that further reduced their benefits—Oetken set the case for trial next month.

The decision is the latest development in a controversy that started years ago when a YAI executive alleged that certain information in the nonprofit’s annual reports was false. Those allegations resulted in YAI agreeing to pay $18 million to state and federal governments, which prompted the nonprofit to make arrangements to meet the payment.

The multimillion-dollar settlement was followed by a New York Times investigation and report over YAI’s compensation practices for its executives. That report resulted in a “scandal” that prompted YAI to stop paying retirement benefits to certain executives, including Levy, in order to complete payment of the $18 million settlement, according to court documents.

Oetken dismissed Levy’s claims of fiduciary breach against YAI’s former board chairman Eliot Green, who was accused of inducing Levy and his wife to sign a contract to cap his benefits at $625,813 annually and reduce the surviving spouse benefit. Levy’s claims against Green were time-barred, the court concluded.

Oetken declined to extend the limitations period to six years, which usually applies to claims involving fraud. Levy was a “sophisticated businessman” who was Green’s counterparty, and, as such, he had no reason to rely on the chairman’s apparently false representation, Oetken concluded.

The court rejected Levy’s request for attorneys’ fees, finding that it was premature at this stage. It also denied Levy’s request for payment of his retirement benefits pending a final resolution of the case.

Rakower Lupkin PLLC represented Levy. Groom Law Group, Chartered represented YAI. Cooley LLP represented Green.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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