Media Release

Release Date: 06/22/1999
Release Number: 99-117
Contact Name: Sharon Morrissey
Phone Number: 202.219.8921

Labor Department Settlement Requires Columbia Firm To Repay Pension Plan More Than $1 Million And Diversify Investments

The U.S. Department of Labor has negotiated a settlement of its lawsuit against Columbia, S.C.-based C.W. Haynes and Company, Inc. and its president. Defendants are required to pay the company’s profit sharing plan $1,093,172.97 for the plan’s 40 percent interest in the Folly Fontaine Commerce Center partnership and the fair market value of the note payable to the plan by the Fontaine partnership.

The defendants also are ordered:

— to diversify the plan’s assets as soon as possible;
— to refrain from investing in real estate or related ventures unless such investments are deemed prudent and advantageous to the plan, and
— to amend its distribution provisions to allow participants to request and receive distributions at and after termination of employment, effective June 30, 1999.

The department’s lawsuit alleged the defendants invested imprudently in real estate and related partnership in excess of $3.3 million. The $1.4 million amount was the outstanding amount of the Folly Fontaine (partnership) loan made by the plan. According to the complaint, the firm invested most of the plan’s assets in real estate and property-related partnerships between 1956 and 1990.

In 1988, the plan made a loan to Folly Fontaine — a partnership owned 40 percent by the plan, not the company, and the remaining 60 percent owned by third-party investors — to purchase land. The loan was subsequently extended until the outstanding loan balance rose to $1,419,825. Haynes and Company and trustee W. E. Sellars allegedly failed to collect the outstanding balance of the loan.

The company was charged with failing to monitor the activities of Sellars or to remedy the improper transactions with the plan.

C.W. Haynes was founded in1934 to conduct investment business with a fire and marine insurance department. It subsequently converted its business to land development and real estate sales. There were 50 participants and $4.78 million in assets in the plan as of June 30, 1996.

The settlement resulted from an investigation conducted by the Atlanta Regional Office of the department’s Pension and Welfare Benefits Administration into alleged violations of the Employee Retirement Income Security Act. The lawsuit was filed in federal district court on June 18 in Savannah, Ga.

(Herman v. C.W. Haynes & Co., Inc.)
Civil Action No. CV499-143

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