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Release Date: October 12, 2007
Release Number: 07-1482-CHI
Contact Name: Brad Mitchell
Phone Number: 312.353.6976

U.S. Labor Department sues former officer of Detroit business to restore funds to pension and profit-sharing plans

Detroit – The U.S. Department of Labor has sued a former executive of American International Inc. in Detroit for improperly using pension and profit-sharing funds for the benefit of the company, and for other violations of the federal Employee Retirement Income Security Act (ERISA).

Frank Vallecorsa, fiduciary of the company’s retirement plans, allegedly transferred a substantial amount of assets from the plans to pay business expenses of the company between 2001 and 2003. The lawsuit also alleges that loan repayments deducted from workers’ paychecks in 2004 and 2005 were retained by the company. In addition, the suit alleges that a prohibited $25,000 payment was made to the former controller, Keith Sherry, from the pension fund, and $469,030 was illegally transferred from the profit-sharing funds to the pension plan to cover benefits of workers owed pension distributions. Finally, American International’s 401(k) plan was abandoned without distributing funds to participants and beneficiaries.

“The department will not hesitate to act when plan fiduciaries fail to carry out their duty to protect the retirement plan assets held on behalf of participants,” said Bradford P. Campbell, assistant secretary of the department’s Employee Benefits Security Administration (EBSA). “Protecting workers’ benefits is a top priority for this administration.”

The suit seeks a court order that would require Vallecorsa to restore any losses to the plans resulting from his fiduciary breaches, permanently bar him from serving as a fiduciary to any ERISA-covered plans and correct any prohibited transactions. The suit also asks the court to appoint an independent fiduciary to terminate the plans and distribute their assets to the eligible participants and beneficiaries.

American International was a heavy equipment moving company in Detroit. The pension and profit-sharing plans covered up to 91 participants and had cumulative assets of $35,400 at the end of 2006.

The suit, filed in federal district court in Detroit, resulted from an investigation conducted by the Detroit district office of EBSA’s Cincinnati regional office. Employers and workers can reach the agency’s Cincinnati Regional Office at 859.578.4680 or toll-free at 1.866.444.EBSA (3272) for help with problems relating to private sector retirement and health plans. In fiscal year 2006, EBSA achieved monetary results of $1.4 billion related to pension, 401(k), health and other benefits for millions of American workers and their families.

Chao v. Vallecorsa
Civil Action Number 2:07-cv-14037

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