News Release

EBSA News Release: January 3, 2011
Contact Name: John M. Chavez
Phone Number: 617-565-2075
Release Number: 10-1404-BOS/BOS 2011-002

US Labor Department obtains judgment restoring nearly $34,000
in misused assets to 401(k) plan of Newton, Mass., salon

BOSTON – The U.S. Department of Labor has obtained a consent judgment requiring Sylvestre Franc Inc., operator of a salon in Newton, Mass., as well as the company’s owner and the plan trustee, to restore $33,918.73 in misused plan assets to the company’s 401(k) plan.

The department’s suit, filed in the U.S. District Court for the District of Massachusetts, alleged violations of the Employee Retirement Income Security Act. Named as defendants in the suit are the company; Frank McDonnell, the company’s sole owner and president; and his wife, Sharon McDonnell, who was the named trustee of the 401(k) plan.

The defendants allegedly failed to remit to the plan employee contributions withheld from Sylvestre employees’ paychecks between Oct. 1, 1998, and Dec. 31, 2008. The suit also alleged that the employee contributions, which were legally assets of the plan, were used by the defendants to satisfy the obligations of Sylvestre Franc Inc. In addition, the suit alleged that the defendants’ failure to forward employee contributions to the plan resulted in losses to the plan, including both unremitted contributions and lost earnings.

“Employee benefit plan fiduciaries must act solely in the interests of the plan and its participants,” said Edward Maloney, acting regional director of the department’s Employee Benefits Security Administration in Boston. “The use of plan assets by fiduciaries for any other purpose will not be tolerated, and the Labor Department will not hesitate to take the necessary legal steps to end such misuse of plan funds.”

The consent judgment, approved by the court, permanently orders the defendants to pay to the 401(k) plan a total of $33,918.73 representing principal and lost earnings. The restitution will be allocated among the participants whose contributions were withheld but never transmitted to the plan. Defendants Frank McDonnell and Sharon McDonnell are permanently prohibited by the court order from serving as fiduciaries to any employee benefit plan subject to ERISA.

This case resulted from an investigation by EBSA’s Boston Regional Office. In fiscal year 2009, the department achieved monetary results of $1.3 billion in pension, 401(k), health and other benefits for millions of American workers and their families. Employers and workers can contact EBSA’s Boston office at 617-565-9600 or toll-free at 866-444-3272 for more information on ERISA’s requirements or for help with problems relating to private sector pension and health plans. Additional information can be found at http://www.dol.gov/ebsa.

Solis v. Sylvestre Franc Inc.
Civil Action Number: 1:10-CV-11645-MLW

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