The Labor Department is investigating Geller Group LLC, a retirement plan administrator and registered investment adviser, for failing to disclose alleged ties to an accounting firm it recommended as an auditor and for other possible violations, according to former employees and others close to the investigation.
The Labor Department is investigating Geller Group LLC, a retirement plan administrator and registered investment adviser, for failing to disclose alleged ties to an accounting firm it recommended as an auditor and for other possible violations, according to former employees and others close to the investigation.
The probe, which began with the Labor Department's Employee Benefits Security Administration and includes at least one representative of the Office of Labor Racketeering and Fraud, is in the early stages but could lead to prosecution by the Justice Department, they said.
Lester Caesar, who headed the auditing firm in question, confirmed that he has been reported by the EBSA to the American Institute of Certified Public Accountants' professional-ethics division. He said he is contesting EBSA's conclusions.
The AICPA doesn't comment on cases unless sanctions are brought. However, it has the power to expel a member and also can refer its findings to the New York State Education Department, which can revoke a CPA's certification, said Bill Roberts, a spokesman for the accounting group.
A Labor Department spokeswoman and agency officials believed to be conducting the investigation declined to comment.
Geller, which administers $1.8 billion of corporate retirement plans to about 1,000 clients and is an affiliate of the roll-up firm Focus Financial Partners LLC, sublet space at its office in midtown Manhattan to Caesar & Associates PC from late 2005 through last summer, issued paychecks to the auditing firm's employees for some of that time and made pricing decisions on the audits, former employees said. Geller's managing partners — Sheldon Geller and Manny Erlich — also were trustees of the small auditing firm's retirement plan, which ended 2005 with $80,927 for five employees, according to an Internal Revenue Service filing.
Geller actively marketed Caesar & Associates as an efficient way for clients to fulfill regulatory requirements despite the Employee Retirement Income Security Act of 1974's requirement that auditors be independent of plan administrators and record keepers.
“We reduce your need to confer with another service provider to reconcile IRS Form 5500 [which firms with more than 100 employees must file annually] and the audited financial statements,” Geller's website said in 2006, referring specifically to Caesar & Associates and its ability to prepare “a cost-effective audit report and accountant's opinion… We streamline the audit engagement by managing all phases of the plan audit.”
That language was removed from Geller's website after Mr. Caesar began directly issuing paychecks to employees in late 2007, sources said, as was a pledge by Geller to consult “at no additional fee” with auditors of clients who did not choose Caesar. The web page still boasts that Geller is “likely” to help clients “reduce your audit fee and relieve your human resources and financial managers from spending valuable time on the plan audit engagement.”
Last summer, after a lengthy in-office examination by the DOL of Caesar & Associates' ability to conduct adequate audits of about 80 clients with just three active auditors, Mr. Caesar sold the auditing business to an employee, Julie Chodor, and now focuses solely on his accounting practice, Lester S. Caesar & Co.
“The practice has been sold, Geller is completely out of it, and I'm completely out of it,” he said. Mr. Caesar said he had no knowledge of a further investigation by DOL.
Ms. Chodor said her two-person firm, Chodor & Associates, moved out of Geller's offices almost immediately to less expensive quarters but insisted that she and her colleagues always worked “independently of Geller” although Caesar & Associates did use Geller's computer server and other technology. It can be argued that an auditor benefits from working out of the same location as a plan administrator because of the ease of access to records, she added.
Ms. Chodor said she was unaware of any continuing Department of Labor investigation.
To read the full version of this story, please see the Monday, February 8 print edition of InvestmentNews.
