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The U.S. Department of Labor has sued officials of
a now- defunct Gurnee, Ill., business for allegedly depleting the
company’s two pension plans through a series of self-dealing
transactions.
Defendants are Associated Plastic Fabricators,
Inc. president and secretary and 18 percent owner C. Bryce Peper; his wife
Betty Peper, who owned 80 percent of the company; their son Gregory Peper, the
company’s vice president and chief executive officer; Gregory’s wife
Meredith Peper, and E. Lee Pinney, an employee of Scott and Stringfellow, the
company’s full service brokerage firm.
The company sponsored two pension plans — a
401(k) profit sharing plan, which had 18 participants and $1,533,018 in assets,
and a money purchase pension plan, with 15 participants and $480,841 in assets
as of as of Jan. 31, 1998. Neither fund currently has any appreciable assets
remaining as a result of the fiduciaries’ prohibited withdrawals and
imprudent investments.
Prior to May 19, 1998, participants were permitted
to direct the investment of their account balances. After that date C. Bryce
Peper liquidated the plans’ accounts when he entered into an agreement
with Twenty First Century Growth and Income Fund, LLC and imprudently turned
over $1,845,000 of the plans’ assets. Twenty first was formed by Gregory
Peper and managed by Sun Investment Management, LLC. Gregory Peper was
president of Sun Investment Management.
After this imprudent investment was made, the
department further alleges that the funds were depleted through three major
transactions, which included:
- the transfer of $110,000 to Three Little Pischers, LP, a
limited partnership formed on Feb. 1, 1998. The primary assets of Three Little
Pischers was an unsecured promissory note from Gregory Peper, who allegedly has
made no payments. He and his wife Meredith have since filed for Chapter 7
bankruptcy.
- another series of illegal transfers of plan assets to pay a $1
million loan for property in Telluride, Colo., which was owned by Meredith and
Bryce Peper, and
- three separate purchases of a total of 102,000 shares World
Airways stock, which lost its value within a month of the purchases. (World
Airways was selling for $2.18 a share by July 31, 1998.)
In the latter transactions, the Pepers used the
services of E. Lee Pinney to make the transferrals of plan assets for them and
this is the reason he is included in the lawsuit. In addition, the lawsuit
alleges that another series of transactions found plan assets were used to pay
operating expenses of the company.
The Labor Department is seeking to have the court
order the defendants to repay the plans for its losses, plus interest; to set
off the individual plan accounts of Gregory and C. Bryce Peper, and to
permanently bar the defendants from serving as fiduciaries or service providers
to any ERISA-covered employee benefit plan.
The complaint, filed June 28 in the federal
district court in Chicago, resulted from an investigation conducted by the
Chicago Regional Office of the department’s Pension and Welfare Benefits
Administration into alleged violations of the federal pension law.
(Herman v. C. Bryce Peper, et al)
Civil
Action No. 99C 4275 |
