1Point's woes: Assets missing at benefits firm

UPDATED 18 Sept. 2006, 9:35 a.m.: CEO reportedly back in office this morning -- $7 million in one company's 401k money "unrecoverable," say its lawyers; N.Y. charity also suing over retirement assets; no comment from politically active CEO

Email | Print By Richard Lawson, E. Thomas Wood and Walker Duncan

Barry Stokes

UPDATED 18 Sept. 2006, 9:35 a.m.:

1Point Solutions CEO Barry Stokes was back in the company's Dickson offices this morning, according to a source familiar with the company. Attempts to reach Stokes about the legal action filed against him and the company continue to be unsuccessful.

As originally posted:

Barry Stokes -- a politically active Democrat, a nationally known advocate of consumer-driven healthcare plans, and the CEO of an employee benefits firm with a national clientele -- is facing legal action from retirement plan clients who say millions of dollars are missing from accounts Stokes administered.

And as of this afternoon, sources tell NashvillePost.com, Stokes has not been seen in person for some 48 hours by his colleagues at Dickson-based 1Point Solutions, who say they do not know his whereabouts.

Stokes stands accused of losing $7 million of one company's 401(k) funds. In a lawsuit filed Wednesday in the U.S. District Court for the Middle District of Tennessee, Smyrna-based Beck/Arnley Worldparts Corp. claims that 1Point and Stokes "engaged in a deliberate course of conduct to misappropriate plan assets to their own use and purpose." They also tried to hide their misappropriation from Beck/Arnley and the plan participants, claims the lawsuit, a copy of which is available at this link.

The Jewish Fund for Justice, a New York City-based charity, sued 1Point in April over the handling of its tax deferred annuity retirement plan. The complaint, filed in Lower Manhattan's U.S. District Court, alleged that the company, which had been hired in 2003 to serve as the plan's administrator, failed to return all of the plan's assets by May 31, 2005 as agreed when it resigned as administrator. The lawsuit says 1Point has never returned funds totalling nearly $337,000.

Both lawsuits assert that Stokes has made promises to turn over the money but has failed to do so.

Efforts by NashvillePost.com to reach Stokes for comment yesterday and today have been unsuccessful.

1Point provides a range of employee benefit and retirement services. Last year, it was a Music City Future 50 Company, a ranking put together by the Nashville Area Chamber of Commerce. The company reported revenue of $2.2 million. An internet search indicates that its customers include Metro Nashville Public Schools, Knox and Hamilton County Schools, the University of Memphis, the University of Nevada at Reno, the Texas Municipal League, and the state of Louisiana.

The company's particular specialty is administering health-spending accounts, or HSAs, which were created by federal law in 2004 and provide an avenue for employees to put a certain amount of money aside tax-free to cover medical expenses. These accounts are a so-called consumer-driven way of reducing healthcare costs and typically are combined with high-deductible healthcare insurance plans.

A source familiar with 1Point's operations says that its administration of HSAs, which constitutes the majority of its business, does not involve the handling of large amounts of other people's money. The source tells NashvilllePost.com that administration of retirement plans, in which 1Point did have custody of considerable sums at times, was handled solely by Stokes himself.

Stokes has fashioned himself as an expert on HSAs. Assuming the persona of the "Consumer-Driven Guy," he has spoken at conferences, been quoted in healthcare publications and appeared on Fox News Talk Radio. He even sent a press release out last November praising Wal-Mart for offering high-deductible healthcare plans to employees who wouldn't qualify for the employer-sponsored plans.

Stokes' business interests have extended beyond the employee benefit and retirement business. He was one of the partners in Chapel Bistro, an East Nashville eatery that was sold in June. Local attorney Jerry Martin, another partner in the venture, says Stokes made a "modest" investment of $49,000 in the bistro in 2004 and added some $10,000 in further investments over time.

A Democrat, Stokes also has been a supporter of political candidates including Gov. Phil Bredesen. According to Federal Election Commission records, Stokes has contributed more than $35,000 to federal-level Democratic causes and candidates since 2002.

According to the Beck/Arnley lawsuit, Beck/Arnley hired 1Point last April as a third party administrator for its employee benefits plan. The advisor was supposed to "provide a platform to sufficiently diversify investments of the plan so as to minimize the risk of large losses."

Beck/Arnley deposited the assets in a non-brokerage account with Spelman & Co. Inc., a San Diego broker-dealer that is part of the AIG SunAmerica Financial Network, a subsidiary of SunAmerica Inc. About 120 past and current Beck/Arnley employees enrolled in the plan. This year, however, the company began getting complaints from employees regarding discrepancies in their account statements and other information 1Point was providing. Employees also were complaining about the length of time it was taking to receive benefits.

In an affidavit by Gail Holt, the company's vice president for administration, "employees reported that they noticed that their accounts would perform differently than their spouses' accounts that were reported to be invested in identical mutual funds." She said one employee believed he had $400,000 in his account and had planned on retiring at the end of the year after 30 years with Beck/Arnley.

Everything began to unravel after Beck/Arnley hired another administrator and tried to have the assets transferred. According to the lawsuit, 1Point agreed to transfer the assets on Sept. 1. That didn't happen. Then last Friday, Beck/Arnley learned the fateful news from the attorney representing 1Point and Stokes, Neal & Harwell's Tom Dundon, according to the lawsuit. The funds were "gone and likely unrecoverable." In the affidavit, Holt reported: "Mr. Dundon reported that his clients had lost the money in bad business ventures."

Beck/Arnley claims that since last May, 1Point and Stokes falsified written statements that detailed the location and amount of the money. They also falsified the information on the internet site employees could access, the lawsuit claims. Beck/Arnley wants the assets back and for 1Point and Stokes to account for all the funds. And the company sought a restraining order to keep the defendants from moving the assets; the court granted the order on Wednesday.

Beck/Arnley's Nashville attorney, Dianna Baker Shew of Stites & Harbison, told NashvillePost.com: "At this point, we are pursuing all appropriate legal remedies."