Feds order $420K repayment over failed Prineville resort
Under a deal reached with federal officials, the president of a Portland real state firm has been ordered to repay over $420,000 to its profit-sharing plan for losses due to “imprudent” real estate investments in a planned Prineville resort that eventually failed.
Under terms o a consent judgment entered into by the U.S. Department of Labor, Portland-based Georgetown Realty Inc., the company’s owner, John Mahaffy, and the Georgetown Realty Inc. Profit Sharing Plan and Trust, will pay $420,127 to the plan for losses due to imprudent real estate investments directed by Mahaffy.
“Employee benefit plan fiduciaries have a duty to put the interest of plan participants and beneficiaries above all others when considering an investment,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis Borzi.
“This judgment means plan assets are going back where they belong – into the plan accounts and eventually into participants’ pockets.”
An investigation by the department’s Employee Benefits Security Administration found that, from 2005 to 2007, Mahaffy used the plan’s assets to purchase property in an effort to develop it into a resort, known as the RiverGate project.
The project involved purchasing parcels of land overlooking the Crooked River and the Meadow Lakes Golf Course in Prineville.
By the end of 2008, Mahaffy had spent most of the plan’s cash and sold off most of its securities to fund RiverGate, officials said.
Mahaffy’s actions left the plan with more than 80 percent of its assets in the RiverGate project, an illiquid investment.
The project failed, the lenders foreclosed on the plan’s properties throughout 2009 and 2010, and the plan participants lost substantial retirement assets., the Labor Department noted.
In addition to repaying the plan for losses, as ordered by the U.S. District Court for the District of Oregon, Portland Division, Mahaffy also was barred from serving any employee benefit plan covered under the Employee Retirement Income Security Act.
The case was litigated by the department’s San Francisco Regional Office of the Solicitor following an investigation by EBSA’s Seattle District Office. Workers or employers with questions about employee benefit plans can contact EBSA at http://www.askebsa.dol.gov or 866-444-3272.
Civil Action Number 3:12-cv-01164
Perez v. Georgetown Realty, Inc., John Mahaffy, and Georgetown Realty Inc. Profit Sharing Plan and Trust
