Weekend DOL Blotter - 11/23/2008

Once again, the DOL failed to disappoint us this week, announcing two new enforcement actions:
"Owner of defunct North Carolina sign company pleads guilty to embezzlement of 401(k) and health plan assets."

Atlanta — The owner of defunct Wesco Signs Inc., Concord, North Carolina, pleaded guilty in the U.S. District Court for the Middle District of North Carolina in Greensboro to two counts of embezzlement of assets from the company’s 401(k) and health plans.

The plea agreement was prosecuted by the U.S. Attorney’s Office for the Middle District of North Carolina and was investigated by the Atlanta Regional Office of the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA).

Mitchell W. Messer was indicted by a federal grand jury August 26 on two counts of embezzling assets from employee benefit plans governed by the Employee Retirement Income Security Act. The indictment charged Messer with embezzlement of $19,286.21 in 401(k) assets and $5,583.38 in health care premiums.

During the period from February 4 through June 17, 2005, he failed to forward retirement plan contributions deducted from employees’ paychecks. Messer also did not forward health care premiums withheld from employee wages during the period of July 11 to November 4, 2005.

At the time of the criminal violations, Messer was the majority owner and president of Wesco Signs. The company, which manufactured electric and on-premise signs, sponsored a 401(k) for 46 participants as well as a health benefit plan.

As part of his plea agreement, Messer will make restitution to the plans and agreed to pay a special assessment of $100 for each offense. He is scheduled to be sentenced February 5, 2009.

“Theft of employee benefit assets jeopardizes the benefits of workers. This case sends a clear message that theft of employee benefit plan assets is a serious crime that will be prosecuted to the full extent of the law,” said R.C. Marshall, director of EBSA’s Atlanta Regional Office.

U.S. v. Messer
Criminal Number 1:08CR324-1

The next action was a lawsuit filed by the DOL against a health plan provider in North Carolina: "U.S. Department of Labor sues North Carolina health provider to restore funds to employees’ pension plan".

Atlanta – The U.S. Department of Labor has sued current and former fiduciaries of the money purchase pension plan of Vance-Warren Comprehensive Health Plan Inc. of Manson, North Carolina, to restore more than $120,000 in employer contributions and interest owed to the company’s pension plan.

The Labor Department’s lawsuit, filed in the U.S. District Court for the Middle District of North Carolina, alleges that Vance-Warren, Hazel Silver-Boyd, Charles Worth, Charles Walton and A. Shelton McCray failed to fulfill their fiduciary duties under the Employee Retirement Income Security Act (ERISA).

Plan administrator Vance-Warren allegedly failed to pursue collection of $82,047 in mandatory employer contributions, lost earnings on those contributions and contributions recently funded into the trust. The suit also alleges that the company and other fiduciaries co-mingled plan assets with those of the company, and failed to collect and allocate interest income in the amount of $42,094 from December 2004 through October 2005 and plan years 2006, 2007 and 2008. The suit alleges that all of the fiduciaries failed to take reasonable action to rectify these fiduciary breaches.

The suit asks the court to bar the defendants from serving as fiduciaries to any employee benefit plan covered by ERISA, appoint an independent fiduciary to manage the plan and require the defendants to restore to the plan all losses with interest that resulted from their improper actions.
...
Chao v. Vance-Warren Comprehensive Health Plan Inc.
(Civil Action File Number 08-CV-827)