Media Release

Release Date: 06/29/1999
Release Number:V-132
Contact Name: Sharon Morrissey
Phone Number: 202.219.8921

Labor Department Sues Gurnee, Ill., Company Officials For Depleting Two Pension Plans

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

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