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New York, New York - The U.S. Labor Department
sued the fiduciaries of the 401(k) plan of the bankrupt Standard
Automotive Corporation, headquartered in Hillsborough Township, New
Jersey, for alleged misuse of more than $800,000 in plan assets to pay
improper legal expenses.
“Workers are counting on these funds for their
retirement and we are doing everything we can to help them,” said
Secretary of Labor Elaine L. Chao. “Protecting workers’ benefits is a
top priority for us; last year the department achieved record monetary
results totaling $3.1 billion for retirement, 401(k), health and other
programs.”
The Labor Department lawsuit alleges fiduciaries
Anthony Scialabba and Morton Batt, and John E. Elliott II, chairman of the
board of directors of the corporation, violated the Employee Retirement
Income Security Act (ERISA). The defendants allegedly allowed over
$800,000 to be used to pay the law firm Anthony L. Scialabba and
Associates for legal services that were improper, unnecessary and
unreasonably costly given the level of plan assets.
According to the suit, Scialabba approved approximately
one-half of the payments by the plan for legal services provided by his
firm at various times from September 2001 to July 2003, without obtaining
approval of the board of directors of Standard Automotive. After Scialabba
resigned in December 2003, Batt approved payment of the balance of the
$800,000 and retained Scialabba’s law firm as special counsel to the
plan. Elliott hired both Scialabba and then Batt as trustee of the plan.
The corporation, a holding company for manufacturers of
components for the trucking and aerospace industries, filed for bankruptcy
in March 2002. As of January 2005, the plan had $2,520,316 in assets.
The Labor Department is seeking to restore the
improperly removed funds, along with interest, and to bar Scialabba from
serving as a fiduciary or service provider to an ERISA-covered plan in the
future.
Employers with similar problems, who are not yet the
subject of an EBSA investigation, may be eligible to participate in the
department’s Voluntary Fiduciary Correction Program (VFCP).
Participation in the VFCP requires employers to correct violations of the
law but allows them to avoid EBSA enforcement actions and civil penalties
as well as any applicable excise taxes. For more information about the
VFCP, visit www.dol.gov/ebsa.
Employers and workers can reach EBSA’s New York
regional office at 212.607.8600 or through EBSA’s toll-free number,
1.866.444.EBSA (3272), for help with problems relating to private-sector
retirement and health plans.
(Chao v. Scialabba)
Civil Action No. 1:05-cv-3732 |
