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Release Date: 07/18,2003
Release Number: BOS 2003-175
Contact Name: John M. Chavez
Phone Number: 617.565.2075
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Boston, Massachusetts - The trustees of a Norwich,
Connecticut, company’s
profit sharing and pension plans have agreed to resolve over $800,000 in
claims regarding prohibited loans and imprudent investments and to resolve
a lawsuit filed against them by the U.S. Department of Labor. |
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The suit, filed June 28, 2002, in the U.S. District
Court for Connecticut, charged Steven A. Becker, John F. Smith, Jr.,
Timothy Griffin, Phillip Warzecha, Kendland Company, Inc., Kendland
Company, Inc. Profit Sharing Plan and Kendland Company, Inc. Money
Purchase Plan with violations of the Employee Retirement Income Security
Act (ERISA), the federal law that protects private sector employee benefit
plans. |
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According to James Benages, Boston regional director
for the Labor Department’s Employee Benefits Security Administration (EBSA),
the Kendland Company, Inc., now defunct, was a mechanical contractor
(heating, ventilation, and air conditioning) based in Norwich, Connecticut. The
company was the plan sponsor for both profit sharing and money purchase
plans that were set up in 1979 to provide retirement and death benefits
for employees. The defendants served as trustees of both plans at various
times from 1979 to the present. |
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The department’s suit alleged that in 1994 and 1995
the company and the trustees then in office caused the profit sharing plan
to improperly loan $378,000 to the company and the money purchase plan to
improperly loan $923,000, also to the company. While the principal amounts
on these loans were partially repaid, only a limited amount of interest
was paid on the loans. The suit also alleged other improper transactions
involving both plans, including ill-advised investments in several limited
partnerships. |
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With respect to the loan transactions Benages said:
“The law specifically prohibits these types of transactions between
employee benefit plans and plan sponsors. The funds in these plans are to
be used strictly for the benefit of the plan participants and no one
else.” He noted that, at the end of 2002, the profit sharing plan had
107 participants and the money purchase plan had 97 participants. |
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The consent judgment, which resolves the lawsuit, was
signed by U.S. District Judge Dominic J. Squatrito on July 15, 2003. It
prohibits the individual defendants from future violations of ERISA, and
permanently enjoins Steven A. Becker from ever serving as a fiduciary or
service provider to any ERISA-covered plan. It requires the orderly
termination of the plans and the timely distribution to each plan
participant their respective shares of the plan’s assets. |
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In addition, the consent judgment orders defendant
Steven A. Becker to waive a large portion of his interest in both plans in
order that non-trustee participants may receive their full vested benefits
in the plans. |
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This case was investigated by the EBSA’s Boston
regional office. Employers and workers can contact the regional office at
617.565.9600 or the agency’s toll-free number, 1.866.444.EBSA, for help
with problems relating to private-sector pension and health plans.
Additional information can be found at www.dol.gov/ebsa. |
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(Chao v. Steven A. Becker, et al)
Civil Action No. 3:02-CV-01122-DJS |
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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 202.693.7755. |
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