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EBSA News Release: [12/22/2005]
Contact Name: Brad Mitchell
Phone Number: (312) 353-6976
Release
Number: 05-2369-CHI
U.S. Labor Department Obtains Judgment Ordering Kalamazoo, Mich., Business Trustee to Restore Funds to 401(k) Plan
SAN FRANCISCO — The U.S. Department of Labor has obtained an order for summary judgment with respect to defendant Brenda Mackerel, a trustee of the Magic P.I. & Security 401(k) Profit Sharing Plan. The order requires that she restore $650,454.82 to the plan and permanently bars her from serving as a fiduciary for employee benefit plans governed by the Employee Retirement Income Security Act (ERISA).
"The court sided with workers and justice today. These workers saw their hard earned pension plans plundered," said Secretary of Labor Elaine L. Chao. "With today's court decision, the department will pursue full restitution of pension assets and enforce the lifetime ban that keeps this individual from ever again gaining control of any pension assets."
The judgment, issued by the federal district court in the Western District of Michigan, partially resolves a lawsuit filed by the Labor Department alleging that from March 1999 through February 2002, Mackerel, formerly of Kalamazoo, misappropriated funds from the 401(k) plan for company expenses; failed to remit contributions to the plan earned by employees under contracts subject to the requirements of the federal McNamara-O'Hare Service Contract Act (SCA) of 1965, and otherwise failed to properly administer pension plan funds. Magic P.I. & Security Inc., formerly based in Kalamazoo, is no longer in business. The court found that the failure to remit employer contributions to the plan and the use of those plan assets by Magic P.I & Security constituted prohibited transactions with a party in interest and prohibited transfers of plan assets, violations of ERISA.
The department argued, and the court agreed, that the unpaid SCA contributions constitute assets of the plan. Specifically, the court found that, during the period from Dec. 31, 1999 through Feb. 28, 2002, Magic P.I. & Security received $226,745.63 from federal agencies. Those funds, marked as fringe benefit allowances under the terms of the federal contracts and the SCA, should have been deposited in the plan. Instead, Mackerel caused Magic P.I. & Security to use those funds for its operating expenses.
In a separate criminal action, Mackerel was found guilty by the federal District Court in Grand Rapids, Michigan, of embezzlement and money laundering of the 401(k) plan assets, and was sentenced to prison and ordered to make restitution to the plan.
The case was investigated by the Cincinnati regional office of the Labor Department's Employee Benefits Security Administration. Employers and workers can reach the Cincinnati office at (859) 578-4680 or through EBSA's toll-free number, 1-866-444-EBSA (3272), for help with problems relating to private-sector retirement and health plans.
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