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Archived News Release--Caution:
information may be out of date.
For more information call: (202) 219-8921.
Smith International, Inc., has agreed to pay $4.07 million
to the U. S. Department of Labor as part of a settlement over the improper
selection of group annuity contracts to fund pension benefits for its workers
and retirees.
The money will be distributed to some 220 participants and
beneficiaries of a pension plan terminated in 1986. The company received more
than $23 million in residual assets from the plan after it purchased the
annuity contracts.
"This settlement assures that these participants and
beneficiaries receive the benefits promised by their employers," said Olena
Berg, assistant secretary of labor for the Pension and Welfare Benefits
Administration. "It also puts employers on notice that they will be held
responsible for the care with which they select annuities."
Smith International, a Houston-based manufacturer and
marketer of petroleum drilling equipment, sponsored the pension plan. The
annuities were purchased from Executive Life Insurance of California, which was
placed in conservatorship by the State of California in 1991. At that time, the
insurance company was paying approximately 70 percent of monthly annuity
benefits owed to participants and beneficiaries.
The settlement with the department also dismisses all
claims against members of the company's administrative committee, provided the
payment is paid in conformance with the terms of the settlement.
The department sued the company and its administrative
committee in 1992 for imprudently selecting Executive Life as the annuity
provider without adequately investigating the insurer's or any other bidder's
financial stability, creditworthiness or claims- paying ability. The defendants
allegedly based their decision on Executive Life as being the lowest of five
bidders; the resulting increase in surplus pension assets reverted back to the
company.
The consent order was entered on April 12 in federal
district court in Los Angeles. The case resulted from an investigation
conducted by the Dallas office of the Labor Department's Pension and Welfare
Benefits Administration into alleged violations of the Employee Retirement
Income Security Act.
(Reich v. Smith International, Inc.) Civil Action No.
92-1196 (HLH)
Archived News Release--Caution:
information may be out of date.
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