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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 |
