Weekend DOL Blotter - 9/28/2008

Whew! Last week must've been a busy one at the EBSA. There were recordbreaking 5 announcements of enforcement actions or lawsuits brought about by the EBSA last week:

#1 "Sammy be nimble, Sammy be Quick! Another casualty of the housing crisis?

U.S. Labor Department sues First Primary Mortgage Inc. and its trustee for failure to administer employee 401(k) plan

Middleburg Heights, Ohio – The U.S. Department of Labor has sued First Primary Mortgage Inc. of Middleburg Heights, and its owner and the trustee of the First Primary Mortgage Inc. 401(k) Plan, for failure to properly administer the company plan in violation of the Employee Retirement Income Security Act (ERISA).

The lawsuit, filed in federal district court in Cleveland, Ohio, alleges that the defendants have failed to take fiduciary responsibility for the operation and administration of the plan since January 2007. As relief, the suit asks the court to remove the company from its position as a fiduciary and permanently bar Sammy D. Quick, who served as the plan’s trustee, from acting as a fiduciary to any ERISA-covered employee benefit plan. Finally, the suit asks the court to appoint an independent fiduciary to terminate the plan and distribute its assets to eligible participants and beneficiaries.

“The Labor Department is committed to protecting workers’ benefits when plan assets are either misused or the plans are abandoned,” said Paul Baumann, acting director of the department’s Employee Benefits Security Administration (EBSA) Cincinnati Regional Office.

The suit resulted from an investigation conducted by EBSA’s Cincinnati Regional Office. Employers and workers can reach the office at 859.578.4680 or toll-free at 866.444.3272 for help with problems relating to private sector retirement and health plans. In fiscal year 2007, EBSA achieved monetary results of $1.5 billion related to pension, 401(k), health and other benefits for millions of American workers and their families.

Chao v. Quick
Civil Action Number 1:08-cv-02245

#2 Trouble in Fairfield:

U.S. Labor Department sues Fairfield, Connecticut employer to restore funds to company 401(k) plan(This link appeared to be broken)

#3: It's going to be a cold winter in Minneapolis:

U.S. Department of Labor sues executive of defunct Minneapolis company to protect participants of abandoned plan

Minneapolis – The U.S. Department of Labor has sued to appoint an independent fiduciary to administer and terminate the 401(k) plan of KSM Holding Corp., a defunct Minneapolis company.

“We filed this case to ensure that the plan participants are able to recoup the money they entrusted to the plan for their retirement savings,” said Steven Eischen, regional director of the department’s Employee Benefits Security Administration (EBSA) in Kansas City, Missouri.

The company established the plan in 1995 and managed it until 2002 when the company ceased operations. Since that time, the plan’s fiduciary has failed to distribute the remaining assets of the plan and to appoint a fiduciary to assume the responsibility for administering the plan. As a result, some plan participants and beneficiaries have been unable to access their individual account balances.

The lawsuit, filed in the U.S. District Court for the District of Minnesota, seeks to remove Daniel Larson, chief financial officer of KSM and a plan fiduciary, from his position as fiduciary, and appoint an independent fiduciary to terminate the plan and distribute its assets to participants and beneficiaries.


Chao v. KSM Holding Corp.
Civil Action Number xxxxxx

#4: Mr. Conway is in trouble in Boston:

Boston company and officers ordered to restore nearly $73,000 in misused funds to company 401(k) plan to resolve U.S. Labor Department lawsuit

Boston – A federal judge has ordered G. Conway Inc. of Boston and corporate officers Gerard D. Conway and Robert Conway to repay $72,803 to the company’s 401(k) plan to resolve a lawsuit filed by the U.S. Department of Labor that alleged violations of the Employee Retirement Income Security Act (ERISA).

The suit, filed in the U.S. District Court for the District of Massachusetts, alleged that the defendants failed to forward to the plan employee contributions withheld from employees’ paychecks between April 23, 2005, and May 12, 2007. Instead, the defendants allegedly used the withheld employee contributions to satisfy the obligations of the company.
The G. Conway Inc. 401(k) and Profit Sharing Plan provides retirement benefits for company employees. The company is no longer in business. The Labor Department’s Employee Benefits Security Administration’s (EBSA) Boston Regional Office investigated the case.

James Benages, regional director for EBSA’s Boston office, said, “These defendants failed to discharge their fiduciary duties to the plan and its participants. The assets of employee benefit plans are to be used for the sole benefit of plan participants and beneficiaries, not for the benefit of the company that sponsors the plan.”

The consent judgment obtained by the Labor Department orders the defendants to pay the restitution, properly distribute the assets of the plan to plan participants and beneficiaries, and terminate the plan. Gerard D. Conway also is permanently prohibited from serving as a fiduciary to any ERISA-covered plan.

Chao v. Gerard D. Conway
Civil Action Number 1:08-CV-10646-GAO

#5: No surplus cash at Prozy's Army Navy Store:

U.S. Department of Labor sues defunct Wyckoff, N.J., company to protect participants of employee profit-sharing plan

Wyckoff, N.J. — The U.S. Labor Department has sued to obtain appointment of an independent fiduciary to oversee the employee profit-sharing plan of Jules Prosnitz & Sons Inc., formerly doing business as “Prozy’s Army-Navy Store,” a defunct company located in Wyckoff.

“We filed this case to protect the participants who entrusted their savings to the trustees of the plan,” said Jonathan Kay, regional administrator of the department’s Employee Benefits Security Administration (EBSA) in New York.

The company ceased operations in February 2005. Since that time, Jules Prosnitz & Sons has not taken fiduciary responsibility for the operation and administration of the plan and its assets; nor has it appointed anyone to assume that responsibility. As a result, plan participants and beneficiaries have not been able to access their individual account balances. It is believed that the plan has five participants.
The complaint, filed in the U.S. District Court for the District of New Jersey, seeks to appoint an independent fiduciary to terminate the plan and distribute its assets to participants and beneficiaries.

As of December 2007, the latest data available, the plan had approximately $110,178 in assets.

The suit resulted from an investigation conducted by EBSA’s regional office in New York. Employers and workers can contact the office at 212.607.8600 or toll-free at 866.444.3272 for help with problems relating to private sector pension and health plans.

In fiscal year 2007, EBSA achieved monetary results $1.5 billion related to pension, 401(k), health and other benefits for millions of American workers and their families. Additional information can be found at www.dol.gov/ebsa.

Chao v. Prozy’s Employees Profit Sharing Plan
Docket Number: 08-cv-4616