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Release Date: 03/15/99
Release Number:
III-99-03-15-018-PA
Contact Name: Sharon Morrissey
Phone Number:
202.219.8921 |
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The U.S. Department of Labor today filed a lawsuit
against trustees of two pension plans sponsored by the Sutersville Lumber
Company for violating federal pension law by transferring over $500,000 in
profit sharing plan assets to the company to pay off a bank loan, which is
guaranteed, to its employee stock ownership plan (ESOP). |
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The lawsuit also named the profit sharing
plan’s former investment manager, Radnor Capital Management Inc. of
Radnor, Pa. and one of its principals, Pierce Archer, for allowing the
prohibited transfer to pay off the bank loan. |
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Named defendants are Jay Miller, Richard Nesbit
and Rona Nesbit, daughter of Richard Nesbit and niece of Miller. She filed for
bankruptcy Dec. 8, 1998; however, the department has petitioned a federal
bankruptcy court to prevent her from discharging in bankruptcy her debts owed
to the plans. |
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The company, which went bankrupt and was
liquidated in 1997, was a family-owned lumber yard and home improvement center
located in Sutersville, Pa. It established a profit sharing plan for all of its
employees in 1976 and an employee stock ownership plan in 1987. Sutersville
purported to merge the two plans in 1993. After the plans merged, combined plan
assets totaled $3,096,814. |
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When Jay Miller retired, trustees allegedly sold
marketable securities held in other participants’ self-directed individual
accounts to pay him the value of his Sutersville stock. Eventually he was paid
a total of $814,710. At about the same time, allegedly five other participants
retired and requested their benefits. Again, the trustees allegedly sold
marketable securities held in other participants’ accounts to pay retiring
participants the value of their Sutersville stock in cash. |
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And, finally, the ESOP allegedly was further
depleted when Rona Nesbit took an in- service withdrawal of $25,000 even though
her account balance contained only company stock and Richard Nesbit, who also
retired, withdrew approximately $350,000 from his account. According to the
lawsuit, Richard Nesbit has not received his entire account balance and the
trustees are unable to pay any benefits to the plan’s remaining 12
participants. |
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Allegedly, the ESOP has approximately $75,000 in
cash and marketable securities and the 12 participants are owed over $475,000
plus lost opportunity costs. |
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The Labor Department is seeking to remove the
defendants from any positions with the plan, to permanently bar them from
serving these or any other employee benefit plans under the Employee Retirement
Income Security Act (ERISA), and to require that the defendants restore to the
plans all losses, plus lost opportunity costs. It also seeks to have an
independent fiduciary named by the court to administer the plan and, as
necessary, to set off the defendants’ individual accounts against the
losses and redistribute them to other remaining plan participants. |
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The lawsuit is a result of an investigation
conducted by the Philadelphia Regional Office of the Department’s Pension
and Welfare Benefits Administration into alleged violations of the ERISA. It
was filed in federal district court on March 15 in the federal district court
in the Western District of Pennsylvania in Pittsburgh. |
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Herman v. Sutersville
(Civil Action #
90-904) |
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U.S. Department of
Labor news releases are accessible on the Internet. The information in this
news release will be made available in alternate format upon request (large
print, Braille, audio tape or disc) from the Central Office for Assistive
Services and Technology. Please specify which news release when placing your
request. Call 202.693.7773 or TTY 202.693.7775. |
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