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North Oakland Radiology Company, Principal Sued for Prohibited Loans Made From 401(k) Pension Plan
Contact Name: Robert Jogan / Sharon Morrissey
Phone Number: 313.226.7450 / 202.219.8921
North Oakland Radiology, P.C. of Clarkston, Mich., in suburban Detroit and its president have been sued by the U.S. Department of Labor for depleting the company's 401(k) profit sharing pension plan through a series of prohibited loans made to them. The department also filed a separate lawsuit in federal bankruptcy court to prevent the company's president from escaping the responsibility for paying any debts owed to the plan.
According to the lawsuit, Dr. Lawrence Wayburn caused the plan to loan his company more than $287,000 from January 1988 until December 1995. To date, the plan has not received any principal and only sporadic interest payments on the promissory notes made for the loans.
The lawsuit also alleges that the defendants failed to act prudently when they invested between 16.1 and 51.7 per cent of its total assets in an interest-bearing checking account.
Beginning in 1986, Wayburn caused the plan to loan him personally more than $128,000 which he also has not repaid and only made sporadic interest payments. According to the bankruptcy filing, Wayburn used the majority of this money to purchase a vacant parcel of property, pay personal income tax owed by him and pay a cash call on a partnership in which he had an interest.
The plan had 35 participants and assets totaling $639,468 in December 1994. The plan, which was a profit sharing plan, was amended to include a 401(k) component in 1993 whereby clinic employees were allowed to elect salary deferrals to it.
The department is seeking a court order to require that the company and Wayburn repay the plan for its losses plus interest, and to remove Wayburn from his position as a trustee of the plan and permanently bar him from serving as a fiduciary to any employee benefit plan governed by the Employee Retirement Income Security Act. The complaint also seeks to have an independent trustee named to manage the plan.
The cases are the result of an investigation conducted by the Detroit District Office of the department's Pension and Welfare Benefits Administration, which is responsible for administering the federal pension law. The civil case was filed in federal district court in Detroit on April 17 and the bankruptcy action was filed in federal bankruptcy court in Detroit also on April 17.
(Metzler v. North Oakland Radiology, P.C.)
Civil Action # 97-71678
(Metzler v. Lawrence Wayburn, M.D.)
Chapter 11 Proceedings Case # 97-4297
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