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Release Date: Tuesday, April 27, 1999
Release Number: 99-068
Contact Name: John M. Chavez
Phone
Number: (617) 565-2075 |
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The trustee of two Lexington, Massachusetts-based employee benefit
plans and two officers of the now-defunct Auto Engineering Limited
Partnership of Lexington have agreed to restore a total of $115,000
to the company’s employee stock ownership plan (ESOP) in order to conclude
several lawsuits filed by the U.S. Department of Labor. |
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According to James Benages, New England Regional Director of the
Labor Department’s Pension & Welfare Benefits Administration, the
Department filed suit in 1996 against Stephen McLane, the trustee, as well as
Kenneth Fullerton, William Currie and Charles Henninger, who were officials of
the former luxury car dealership. He noted that a Department suit had also
named Auto Engineering Limited Partnership and Wainwright Bank and Trust
Company, which served as a custodian for the company’s profit sharing
plan, as defendants at the time. All were charged with violating or
participating in violations of the federal Employee Retirement Income Security
Act (ERISA), which protects private pensions and employee benefit
plans. |
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The lawsuits alleged, among other things, that the individual
defendants were liable under ERISA for participating in and benefitting from
illegal transactions in which McLane engaged that resulted in the misuse of
plan money, including:
- depositing assets of the profit sharing plan into a non-plan
account for purposes of making undocumented and unsecured loans to Auto
Engineering;
- using plan money as collateral for corporate loans and
permitting the bank to use plan assets to offset the company's debt to the
bank;
- improperly loaning plan money to a participant without
obtaining proper documentation and subsequently using the loan proceeds to
offset a personal debt owed by the participant to the company;
- failing to properly establish the ESOP, to remit employee
contributions to the trust and to allocate shares of company stock purchased
through the ESOP to the accounts of participants;
- not paying benefits owed to participants; and
- allowing the plan's administrator to not file annual financial
and other reports required by the Employee Retirement Income Security Act.
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On December 19, 1997, a Partial Consent Judgment was entered which
resolved the profit sharing plan component of this case, following the
restoration by Wainwright Bank and two officials of Auto Engineering (Fullerton
and Currie)of a total of $390,000 to the participants of the profit sharing
plan. |
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The two Partial Consent Judgments signed by U.S. District Judge
George O’Toole on March 3, 1999, finally resolve the remaining matters in
this case. In one, defendant Stephen McLane agrees to restore to the ESOP a
total of $30,000. Even though he is currently in bankruptcy proceedings,
this is a non-dischargeable judgment against McLane, meaning that his $30,000
debt to the plan remains payable following the conclusion of his bankruptcy. In
the other Partial Consent Judgment, defendants Kenneth Fullerton and William
Currie agree to restore to the ESOP a total of $85,000. In both cases,
the restored monies will be credited to the accounts of plan participants
other than Charles Henninger, William Currie, Kenneth Fullerton and
Stephen McLane. |
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In addition, all of the defendants (except Wainwright Bank and
Trust Company) are permanently prohibited from future violations of ERISA, and
they are permanently enjoined from exercising any authority or control over any
employee benefit plan covered by ERISA in the future. The defendants agreed to
entry of these judgments while neither admitting or denying violations of
ERISA. |
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Benages noted that the investigation leading up to the settlement
of these lawsuits was conducted by the Boston Regional Office of the Pension
& Welfare Benefits Administration of the U.S. Department of Labor. |
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Herman v. Kenneth Fullerton, et al
CA# 96-11874-GAO
Herman v. Stephen McLane, et al
CA# 96-10622-GAO
The information in this release will be made available to sensory
impaired individuals upon request. Voice phone: (617) 565-2072. TDD
(Telecommunications Device for the Deaf) Message Referral Phone:
800-347-8029. |
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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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