Silicon Valley’s largest publicly funded child care provider has been accused of mismanaging its employee pensions.
According to a class-action lawsuit filed just before Christmas in the U.S. District Court in San Jose, the Community Child Care Council of Santa Clara County—commonly called 4Cs—cheated workers out of their promised retirement benefits by enrolling them in plans with exceptionally high fees and poor investment choices.
The complaint, filed by Mario Del Castillo, Michael Rasche and Puthea Chea—two ex-employees and one who still works there, respectively—accuses 4Cs of running afoul of federal law by failing to exercise prudent judgment of how assets would be invested.
Plaintiffs also claim that the nonprofit, which is bankrolled by roughly $45 million a year in taxpayer money, failed to document the terms of the retirement plans, unreasonably restricted employees from accessing their benefits and allowed their pension contributions to get eaten up by penalties and fees paid to various companies.
Click here to read a copy of the complaint.
“It’s just a really bad deal that all these employees got looped into,” their attorney Adam Thomas said in a phone call Tuesday.
Employees say the 4C Council roped them into the scheme by telling them to sign an enrollment application that was, in reality, a binding contract by which they unwittingly agreed to convert their vested retirement into “a highly restricted and financially imprudent” life annuity.
San Jose Inside first reported on the the nonprofit’s mismanagement in fall of 2016 and broke the story about problems with its pension accounts in January 2017, after some former employees claimed that their retirement payments were being inexplicably withheld. The 4C Council, which provides subsidized day care to more than 5,000 low-income families, was already mired in a drawn-out legal battle with employees who were squaring off with then-Executive Director Alfredo Villaseñor in a bid to unionize.
Villaseñor resigned in August amid several separate audits, including one ordered by state legislators to probe allegations of financial dysfunction and what led to the closure of several day care centers in the past year-and-a-half.
His successor, friend and former FBI agent named Joseph Manarang, didn’t immediately return San Jose Inside’s queries this week. Board President Ben Menor—who was exonerated of charges of pilfering taxpayer money from another public service agency years ago—deferred questions to 4Cs’ attorneys, former San Francisco Mayor Willie Brown and insurance lawyer David Millstein, who have yet to return calls for comment.