Weekend DOL Blotter - 7/5/2008

Happy Independence Day to all!

Continuing our weekly series of looking into DOL enforcement actions, it appears that the agency has netted a big fish this time: "U.S. Labor Department obtains court approval of settlement restoring $2.2 million to Delphi Corp. retirement plan."

"The U.S. Department of Labor and Troy, Mich.-based Delphi Corp. have obtained approval of settlement by the U.S. bankruptcy court in New York that allows the government to recover more than $2.2 million in retirement plan assets owed to the Delphi Personal Savings Plan for Hourly Employees in the United States."

A little "Oops!"

The claim and settlement resulted from an investigation by the department's Employee Benefits Security Administration (EBSA) into improperly invested dividends the company failed to properly disclose or correct. Between 2000 and 2003, dividends were improperly invested in General Motors Corp. stock, rather than in an income fund as required by Delphi's savings plan.

Weekend DOL Blotter - 6/28/2008

Another busy week at the DOL's EBSA enforcement desk.

"Trouble in Music City"

On June 23rd the DOL reported on its website: "U.S. Department of Labor sues president of Nashville music entertainment company to recover employee benefit contributions":

"The lawsuit alleges that, over the course of a year, the company withheld employee contributions owed to the plan, failed to segregate the contributions from the company’s assets, and did not forward the assets to the plan in accordance with ERISA and the plan’s governing documents. Instead, the defendant co-mingled the funds with the general assets of the company.

“Employees intended these contributions to pay for their future retired years, not to benefit the company,” said Rebecca Marshall, director of the Atlanta Regional Office of the department’s Employee Benefits Security Administration (EBSA), which investigated this case.

...the suit seeks to remove Taylor as fiduciary of the plan, appoint a successor trustee to distribute restored assets to the nine participants, and bar Taylor from serving as a fiduciary of any ERISA-covered plan in the future."

Serious stuff...

On other news:

"'Fine Line' Fiduciary"

"Former president of Fine Line Drywall, Keene, New Hampshire pleads guilty to theft of employee IRA funds"

"In 2006, Blanchard was indicted and charged with theft by recklessly failing to make specified payments to the Fine Line Drywall Inc. Simple IRA Plan from February through December 2004, when the company went out of business. Specifically, the alleged theft involved employee contributions totaling nearly $30,000 and employer matching contributions of more than $18,000."

"He was alleged to have stolen these funds for his own personal expenses."

After pleading guilty, Blanchard was sentenced to a prison term of two to five years in the New Hampshire State Prison and suspension of two years provided the defendant meets certain conditions. Blanchard was ordered to make full restitution within two years, perform 200 hours of community service and be subject to random testing for controlled substances.

Weekend DOL Blotter

We are introducing a new feature this week - The Weekend DOL Blotter. Via regular news releases on its website, the DOL releases information on indictments of plan sponsors for various offenses.

Today's feature is hot off the press - The DOL announced on June 19th that it has secured the 401(k) plan assets for Merchants Publishing Co. employees in Kalamazoo, Michigan:

A federal district court in Grand Rapids, Michigan has granted a consent judgment to the U.S. Department of Labor that allows more than $170,000 in 401(k) assets recovered in a criminal action to be distributed to former workers of Merchants Publishing Co. Inc. in Kalamazoo.

The court action resolves the department’s lawsuit against the company and plan trustees M. Jack Fleming and Carol Fleming. The suit alleged that the Flemings failed to remit employee contributions and loan repayments deducted from workers’ paychecks to the 401(k) plan from June 2000 to March 2006, in violation of the Employee Retirement Income Security Act (ERISA). The suit also alleged that the Flemings improperly received transfers of plan assets.

The court appointed an independent fiduciary to distribute plan assets to participants and beneficiaries. Including the $170,000 recovered as a result of a prosecution by the U.S. Attorney’s office in Grand Rapids, the total 401(k) assets to be distributed to eligible participants and beneficiaries exceed $650,000.

“The hardworking men and women of Merchant Publishing relied on the plan trustees to protect their 401(k) benefits,” said Bradford P. Campbell, assistant secretary of the Labor Department’s Employee Benefits Security Administration (EBSA). “Our legal action sends a clear message that plan fiduciaries will be held accountable when they fail to protect the retirement plan assets held on behalf of participants.”

The suit resulted from an investigation conducted by the Detroit district of EBSA’s Cincinnati Regional Office. Employers and workers can reach the regional 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. FlemingCivil Action Number: 4:06cv0117