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The U. S. Department of Labor has sued
Albuquerque, N.M.-based Reams Communications, Inc. doing business as ValuLine
Long Distance, and its officials for a series of prohibited transactions that
have reduced the value of the company-sponsored employee stock ownership plan
(ESOP).
The ESOP was established by Reams Communications
in January 1, 1992. It had 102 participants and $1,093,631 in assets as of Dec.
31, 1995.
The defendants are the company president,
secretary and plan trustee Melvin Reams and vice president Tim Keefer; Fred
Wilson, Jr. of Lubbock, Tex., a shareholder and board of directors member; as
well as Amey Reams and Sheila Reams Keefer, considered in the lawsuit to be
parties-in-interest.
The department’s allegations center on an
April 1995 vote to sell approximately 80 percent of the company’s assets
to TCA Long Distance, Inc., a wholly-owned subsidiary of TCA Communications,
Inc., from which Melvin Reams and Tim Keefer personally received $2.5 million
dollars as non-compete payments. At the time, the plan owned approximately 51
percent of Reams Communications and the department alleged that Melvin Reams
violated the Employee Retirement Income Security Act when he voted the
unallocated ESOP shares and the ESOP shares allocated to participants’
accounts in favor of the sale. Keefer was cited for his failure to monitor
and/or remove Reams as a trustee when this action occurred.
In addition, the lawsuit alleges that Melvin Reams
caused the plan to purchase 416 shares of Reams Communications stock owned by
Fred Wilson, Jr. for $114,440, an amount exceeding the fair market value of the
stocks.
The department is seeking to have the defendants
disgorge any profits, reimburse the plan for the losses plus interest, to
permanently bar the company, Melvin Reams and Tim Keefer from acting as
fiduciaries to any plan covered by ERISA, to remove Melvin Reams from his plan
position and to appoint an independent trustee to manage the plan. To
accomplish the recovery of money for the plan, the department further is
seeking to have the individual accounts of Melvin Reams and Tim Keefer
forfeited and reallocated to the other participants if these defendants do not
otherwise restore losses to the plan.
The complaint resulted from an investigation
conducted by the Dallas Regional Office of the department’s Pension and
Welfare Benefits Administration into alleged violations of federal pension law.
The complaint was entered in federal district court in Albuquerque on Oct.
28.
(Herman v. Reams Communication, Inc., et al.)
Civil Action No. 99-CV 1250 |
