United sues advisory firm for SBDA loan scheme

United Airlines has filed a lawsuit over an alleged scheme with an advisory firm and a scheme to get loans through pilots’ self-directed brokerage window.

United Airlines, Inc., United Airlines Retirement Plans Administrative Committee, and the United Airlines Pilot Retirement Account Plan filed a lawsuit against Keep Safe Investments, LLC, J&K Connect, and Kristi Berge. The lawsuit claims that the defendants concocted and carried out a “scheme by and among Defendants to obtain control over Plan assets in violation of the governing Plan documents and by fraudulent means, and to improperly use those assets for personal gain.”

The scheme involved a self-directed brokerage account (SDBA) the plan included as an investment option. A participant using that window, had to acknowledge that (1) their advisor will only be permitted to withdraw assets from their account to pay advisory fees, and (2) any and all amounts deducted from the account as advisory fees must be for advisory services related to assets in the participant’s brokerage account.

It is alleged that Berge and/or Keep Safe entered into contracts with plan participants, for them to provide investment advice. The problem is that plan participants entered into agreements with J&K, under which the participants agreed to make a loan from their brokerage account to J&K, paying 10% interest annually, over 5 years, while identifying the loan as payment of management fees. The scheme was uncovered when Schwab, as recordkeeper, alerted United, as to excessive management fees being charged against these self-directed brokerage accounts.

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