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Release Date: November 29, 2007
Release Number: 07-1845-PHI
Contact Name: Gloria Della/Richard Manning
Phone Number: 202.693.8664/202.693.4676

Labor Department court order bars West Virginia investment advisor from providing service to employee benefit plans

Charleston, West Virginia – The U. S. Department of Labor has obtained a consent order barring Knox Fuqua, the owner of the Charleston, West Virginia investment firm KHF Advisors LLC, from serving in a fiduciary capacity or as a consultant for compensation to any employee benefit plan governed by the Employee Retirement Income Security Act (ERISA) in the future.

In 2006, the Labor Department obtained a temporary restraining order requiring that two certificates of deposit representing the plan assets be held until the case was resolved. As a result of Labor Department actions, more than $600,000 was protected by preventing First Bank of Charleston and Fuqua from disposing of certificates of deposit acquired with plan assets.

“Our legal action bars this defendant from holding a position of authority that presents an opportunity to misuse the assets of employee benefit plans in the future,” said Mabel Capolongo, director of the Philadelphia Regional Office of the Employee Benefits Security Administration (EBSA).

In its lawsuit, the department alleged that former trustee Fuqua and the bank violated ERISA when they used $600,000 in plan assets as collateral on a loan. Fuqua used plan assets to acquire certificates of deposit in June 2005 in the name of his private investment fund, the Fixed Income Fund. He then used the CDs as security for a loan from the bank to the Fixed Income Fund.

After Fuqua failed to make the interest payments owed on the loan, the bank threatened to liquidate the CDs as payment for the loan. The department also alleged the bank participated in the improper actions of Fuqua because it knew that the assets in the plan account belonged to the 401(k) plan.

The court action, entered in federal district court in Charleston, West Virginia resulted from an investigation conducted by the Philadelphia regional office into alleged violations of ERISA.

Employers and workers can contact the Washington District Office at 301.713.2000 or toll-free at 1.866.444.EBSA (3272), for help with problems relating to private-sector pension 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. Fuqua)
Civil Action No. 2:06-cv-0137

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