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Community Care Systems, Inc. (CCSI), of
Wellesley, Massachusetts, and Frederick Thacher, the company’s
chief executive officer and principal shareholder, have agreed to the
restoration of nearly $140,000 to the pension plan accounts of the participants
of the Community Care Systems, Inc. Employee 401(k) Plan as the result of a
lawsuit filed by the U.S. Department of Labor.
According to James Benages, New England regional
director for the Department’s Pension & Welfare Benefits
Administration (PWBA), in June 1998 his agency filed suit against the
defendants, who operated a number of behavioral health care facilities in
Massachusetts and Maine, alleging that, since November 1997, Thacher and CCSI
had caused some of these subsidiaries to withhold employee 401(k) Plan
contributions from their paychecks without forwarding the money to the Plan.
Benages stressed that such actions are in
violation of the federal law known as the Employee Retirement Income
Security Act (ERISA), which protects the assets of private sector pension
and employee benefit plans and which requires individuals and companies with
authority over and responsibility for plan assets to administer those assets
solely for the benefit of the employee participants and their
beneficiaries.
In a consent judgment and order, agreed to by the
parties and signed by U.S. District Judge Edward F. Harrington on April 5,
1999, and modified on May 24, 1999, Thacher and CCSI agree to the restoration
of $138,036.43 to employees participating in the 401(k) Plan who had
worked for CCSI, Charles River Health Management (CRHM), Charles River Hospital
East (CRHE) of Wellesley, Charles River Hospital West (CRHW) of Chicopee, and
Jackson Brook Institute (JBI), of South Portland, Maine. Some of these
entities have since changed ownership, gone into bankruptcy or ceased to
exist.
According to the modified judgment,
$74,748.81 of the restored amount announced today has been paid to the
fund from the bankruptcy estate of JBI. The balance of $63,287.62
will be paid to the plan from an escrow account held by the court. On June 29,
1998, the Department had obtained a preliminary injunction signed by Judge
Harrington requiring the defendants to transfer $200,000 to an interest-bearing
escrow account and appoint an independent plan administrator to determine the
exact amounts – plus interest – which had been deducted from plan
participants’ paychecks but had not been forwarded to their Plan accounts.
The payback amount announced today is the result of the plan
administrator’s calculations. (The balance of the escrow account will be
retained by the court pending the resolution of another lawsuit involving
CCSI.)
The court order also directs the defendants to
appoint an independent plan administrator and an independent trustee to the
Plan at their expense, and prohibits Thacher and CCSI from ever serving as
trustee, plan administrator or service provider to this or any other employee
benefit plan. The judgment also prohibits the defendants from future violations
of ERISA.
“This judgment affirms,” said Benages,
“that even when an employer who sponsors an employee benefit plan is
having financial difficulties – as have the defendants in this case –
funds deducted from employees’ paychecks for pension or other types of
employee benefit plans must not be used by the employer for other purposes. The
law requires such funds to be transferred to plan accounts without
delay.”
Benages noted that the legal action resulted from
an investigation by PWBA, headquartered in Boston, into alleged violations of
ERISA.
(Herman v Frederick Thacher and Community Care
Systems, Inc.)
Civil Action Number: 98-CV-11202-EFH |
