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Release Date: October 4, 1999
Release
Number: 99-196 Issued by San Francisco Office of Public Affairs
Contact
Name: Mike Shimizu
Phone Number: (206) 553-7620
TDD:
1-800-676-8956 |
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Los Angeles - The U.S. Department of Labor today announced that
two consent decrees were entered September 30, 1999, in the U.S. District Court
for the Northern District of California, San Francisco, which settle a lawsuit
it filed against the law firm of Veatch, Carlson, Grogan & Nelson; James C.
Galloway, Jr., PC, a professional corporation; Phillip M. Borini, the
firm’s executive director and administrator; and attorneys James C.
Galloway, Jr., Mark A. Weinstein, Anthony D. Seine, and C. Snyder
Patin. |
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In a complaint filed simultaneously with these settlement
agreements the department alleged that the Los Angeles law firm, its current
and former partners, and Phillip M. Borini, breached their fiduciary duties
under the Employee Retirement Income Security Act (ERISA) which caused
financial losses to the Veatch, Carlson, Grogan & Nelson Profit Sharing
401(k) Plan, the firm’s pension plan. |
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According to Billy Beaver, regional director for the Los Angeles
Regional Office of the Pension and Welfare Benefits Administration (PWBA), the
defendants agreed to pay more than $647,000 to restore all losses suffered by
the pension plan resulting from untimely and unpaid employee and employer
contributions to the pension plan and from the diversion of participant
forfeitures from pension plan accounts into Veatch, Carlson’s general
account. |
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Beaver explained that one consent decree was based on a settlement
negotiated by the department with C. Snyder Patin, a former partner with the
Veatch, Carlson firm, and the other consent decree was based on a settlement
with the remaining defendants. |
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The consent decree with Patin calls for him to make a lump sum
payment to the pension plan of $127,600 plus interest, and bars him permanently
from serving as a fiduciary of or service provider to any employee benefit plan
covered by ERISA. |
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The consent decree with the remaining defendants calls for them to
restore $647,188 plus interest (minus the payment from Patin) to the pension
plan in monthly installments of $10,000 until March 2001, and monthly
installments of $30,000 thereafter until the total amount owed is fully paid.
The consent decree also requires them to step down as fiduciaries of the
firm’s pension plan, appoint an independent fiduciary to administer the
pension plan, and to pay all costs in connection with the appointment and
retention of the independent fiduciary. Borini will be permanently barred from
serving as a fiduciary of or service provider to any employee benefit plan
covered by ERISA. The other defendants will also be barred permanently from
serving as fiduciaries of or service providers to any employee benefit plan
covered by ERISA, with the exception of performing those fiduciary duties
associated with the appointment and retention of the independent fiduciary on
behalf of the firm’s pension plan. |
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Under the terms of the Plan’s governing documents, Veatch,
Carlson is the employer, plan administrator and the named fiduciary of the
firm’s pension plan, with authority to control and manage its operation
and administration and to direct the investment of its assets, while Borini is
the plan’s trustee authorized to act on behalf of the
partnership. |
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The department alleged that the defendants withheld voluntary
employee contributions from participant paychecks but then failed to forward
these contributions to the pension plan on a timely basis, as required by
ERISA. The alleged failure to forward these funds to the pension plan permitted
these employee contributions instead to be illegally commingled with Veatch,
Carlson’s general funds and used for business purposes, resulting in
financial losses to the pension plan. |
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It was also alleged that Borini failed to collect on a timely
basis employer matching contributions owed to the pension plan. This alleged
failure to collect the employer matching contributions also resulted in losses
to the firm’s pension plan. |
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Further, the terms of the pension plan’s governing documents
required any forfeitures of employer matching contributions to be reallocated
to other pension plan accounts. The depart ment alleged that more than $75,000
in participant forfeitures were not reallocated, but were instead allegedly
diverted by Borini into Veatch, Carlson’s general account and thereupon
used for business purposes. |
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Finally, the department alleged that the other defendants failed
to supervise or monitor Borini’s activities with respect to the
firm’s pension plan, in violation of their fiduciary duties under
ERISA.
Today’s actions resulted from an investigation conducted by
the Los Angeles Regional Office of PWBA. |
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Note to editors: Civil Action File No. C 99-04363 WHO (Herman vs
Veatch, Carlson, Grogan & Nelson et al) |
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U.S. Department of
Labor news releases are accessible on the Internet. The information in this
news release will be made available in alternate format upon request (large
print, Braille, audio tape or disc) from the Central Office for Assistive
Services and Technology. Please specify which news release when placing your
request. Call 202.693.7773 or TTY 202.693.7775. |
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