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News Release

Labor Department Sues Chicago Corporation And Trustee For Misuse Of Pension Assets

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor sued Sherman-Reynolds, Inc. (SRI), of Chicago, Illinois, and Thomas P. Owens, a trustee of the 401(k) profit sharing plan on March 30 for allegedly failing to timely remit employee contributions to the plan's investment account, to collect outstanding participant loans and to obtain a fidelity bond for the plan.

SRI is a corporation that manufactures custom sheet metal. The 401(k) profit sharing plan covered nine participants as of November 10, 1999, and had a total of $774,313.57 in plan assets as of September 30, 1999.
The lawsuit alleges Owens and SRI violated the Employee Retirement Income Security Act (ERISA) by failing:

  • To segregate and timely remit $78,136.48 in employee contributions to the plan's trust, which he used for SRI's general operating expenses, and by failing to segregate and remit $647.56 in employee contributions- both amounts resulted in a total of $1,426.65 in lost opportunity costs to plan participants
  • To make an attempt to collect outstanding loan balances from plan participants
  • To secure a fidelity bond in the minimum amount of 10 percent of the plan's assets, as required under ERISA.

At the time of the alleged actions, Owens was both a trustee of the 401(k) plan and an officer of Sherman-Reynolds, Inc.

The department's lawsuit seeks to require the defendants to repay all losses with interest owed to the 401(k) plan and to offset Owens' plan account to repay the plan and to redistribute the money to the accounts of all eligible participants, excluding him. It also seeks to require Owens to correct any prohibited transactions with the plan; to either secure the appropriate loan repayments to the plan or to liquidate the collateral pledged by the plan participants who defaulted on the loan; and to bar Owens permanently from serving as a fiduciary to any ERISA-covered plan.

"Our goal is to ensure that consumers know that the department is only a phone call away to protect the benefits promised by employers," said Kenneth Bazar, director of PWBA's Chicago Regional Office. "Employers and workers can reach us at 312.353.0900 for help with any problems relating to private-sector pension and health plans."

The department's lawsuit resulted from an investigation by the Chicago Regional Office of the Pension and Welfare Benefits Administration into violations of ERISA It was filed in the federal district court in Chicago, Illinois.

(Chao v. Sherman-Reynolds
Civil Action No. 01-C-2250)

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Archived News Release — Caution: Information may be out of date.

Employee Benefits Security Administration
April 2, 2001
Release Number