USDOL/Pension and Welfare Benefits Administration

Media Release
Release Date: 06/07/2001 Release Number: 081 Contact Name: John M. Chavez Phone Number: 617.565.2075
Dorchester, Massachusetts, Employer Agrees to Return $650,000 to Employee Benefits Plans as the Result of U.S. Labor Department Lawsuit
Boston, Massachusetts - The owner of a now defunct Dorchester-based cardboard box manufacturing company has agreed to restore $650,000 to the pension and profit sharing plans set up for the benefit of his company’s employees as the result of a June 1, 2001 consent judgment and order issued by the U.S. District Court for Massachusetts to settle a lawsuit filed by the U.S. Department of Labor.
While neither admitting nor denying the allegations in the Labor Department’s lawsuit, Harold J. Cohen, owner of Maxwell Products Corporation of 65 East Cottage St., Dorchester, Massachusetts, has agreed to restore the funds to the Maxwell Products Corporation Profit Sharing Plan and the Maxwell Products Corporation Pension Plan, and to forfeit his own financial interests in the plans. The company ceased operations on or about December 31, 1993.
In its suit, filed July 13, 2000, the Labor Department charged Cohen and his company with violations of the Employee Retirement Income Security Act, the federal law that protects private employee pension and welfare benefit plans. During the period covered by the lawsuit – June 1, 1988 through October 2, 1992 – the company employed 24 workers, 23 of whom were participants in the pension plan, while 16 were participants in the profit sharing plan.
The suit alleged that Cohen, acting as a trustee of the plans, and his company, as sponsor of the plans, caused the pension and profit sharing plans to loan, without security or proper documentation, a total of approximately $1,203,582 in plan assets to Maxwell Products Corporation and/or Harold J. Cohen. The suit further alleged that neither the principal nor the interest on these loans were ever repaid. At the time, the total loan amount represented over 90 percent of the combined total assets of the plans.
ERISA requires that employee benefit plan assets be used and invested solely for the benefit of the plan’s participants, according to James Benages, regional director in Boston for the Labor Department’s Pension and Welfare Benefits Administration, which administers ERISA. The law specifically prohibits those in control of plan assets, such as trustees and plan sponsors, from dealing with those assets for their own benefit.
The consent judgment, signed by U.S. District Judge Nancy Gertner, resolves the Labor Department suit in the following ways: It requires Harold J. Cohen and Maxwell Products Corporation to restore to the plans the amount of $650,000 plus post-judgment interest on the outstanding balance according to a set payment plan. It requires Harold J. Cohen to waive receiving any personal benefit payments from either of the plans. Since his personal interests in both plans were substantial, the amounts forfeited by Cohen make up the difference between the $650,000 to be paid and the total amount of the improper loans plus appropriate interest. It requires Cohen to provide the plans with a security interest in the company property located in Dorchester, Massachusetts, until the funds are repaid. Cohen and his company are permanently enjoined from future violations of ERISA. Cohen is permanently enjoined from serving in any position of responsibility with regard to an ERISA-covered plan, and must appoint an independent successor trustee for his company’s plans. Once the final payment is made, Cohen and his company must terminate the plans and insure that all non-trustee participants receive full distribution of their plan account balances.
The Labor Department’s legal action followed an investigation by the Boston Regional Office of the Pension and Welfare Benefits Administration. That office is located in Room 575 of the John F. Kennedy Federal Building in Boston. The telephone number is 617.565.9600.
(Chao v. Harold J. Cohen, et al Civil Action No. 00-11372-NG)
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