Non-ERISA 403(b) plans are still one of the stains of the retirement plan business because, without that ERISA protection, it puts participants at risk for high fees and fraud.

Insurance agents Robert Andrew Lotter and Charles Albert Major were charged with securities fraud violations after allegedly defrauding California school system employees with high-risk investments.

Lotter owned and operated an insurance agency, R.A. Lotter Insurance Marketing, Inc., and Major is a California licensed insurance agent. They contacted clients of the insurance agency and leading some of his victims to believe Lotter’s insurance agency was affiliated with the California State Teacher’s Retirement System (CalSTRS).

Lotter also owns The TDS Group, a 403(b) plan administrator for school districts throughout California. Some TDS Group clients were victimized after they were contacted by TDS Group representatives, who are also insurance agents for R.A. Lotter Insurance operating underdoing business as TDS Benefits & Insurance Services.

Victims were solicited and sold stock certificates in Lotter’s companies. Another scheme was that school district employees who didn’t have enough liquid assets to invest were encouraged to rollover money from their 403(b) accounts into self-directed individual retirement accounts (IRAs), which were used to invest in Lotter’s companies. And, at least one educator was convinced to withdraw money from their pension to invest in Lotter’s companies. The California Department of Insurance claims that 23 victims lost more than $3,036,300.

Lotter and Major were previously arrested in 2020 on similar charges of securities fraud and burglary after allegedly defrauding more than 20 victims out of over $4 million.