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EBSA News Release: [10/23/2008]
Contact Name: Gloria Della or Rick Manning
Phone Number: (202) 693-8664 or x4676
Release
Number: 08-1529-NEW
U.S. Labor Department recovers $8.6 million for workers in settlement
involving Agway 401(k) plan in New York
WASHINGTON —The U.S. Department of Labor has obtained a settlement restoring $8,590,000 to participants of the Agway Inc. 401(k) plan in DeWitt, N.Y., and barring plan officials and the board of directors from service to employee benefit plans for one to two years unless they complete fiduciary training. The defendants also agreed to pay a civil penalty of $859,000 plus interest to the Labor Department.
"This $8.6 million recovery is a victory for the workers whose retirement savings were grossly mismanaged," said Secretary of Labor Elaine L. Chao.
The department's lawsuit resolved by this settlement alleged that 47 members of the investment committee, administration committee and the Agway board of directors violated the Employee Retirement Income Security Act (ERISA) by allowing the 401(k) plan and its participants to invest in overpriced securities of Agway. The investment committee allegedly failed to investigate the prudence of investing in Agway securities, to determine the fair market value of securities acquired by the plan (which was set by Agway), and to monitor and divest the plan's holdings in the securities.
In addition, the administration committee allegedly allowed Agway and the plan to give false and misleading information to participants about the investments in Agway securities, while the board of directors failed to oversee the activities of plan fiduciaries. Some of the defendants included a company attorney, the director of trust investments and the chief executive officer of Agway.
Agway Inc. filed for Chapter 11 bankruptcy in October 2002. The 401(k) plan covered 4,080 participants as of June 30, 2002. The plan held approximately $48 million in Agway securities and $2 million in cash reserves. An independent fiduciary, Fiduciary Counselors Inc., was appointed in 2004 to manage the plan and brought its own separate lawsuit.
The settlement, entered in the U.S. District Court for the Northern District of New York, was investigated by the Boston Regional Office of the Labor Department's Employee Benefits Security Administration (EBSA).
In fiscal year 2007, the department achieved monetary results of $1.5 billion in pension, 401(k), health and other benefits for millions of American workers and their families. Employers and workers can contact the EBSA office in Boston at 617-565-9600 or toll-free at 866-444-3272 for help with problems relating to private sector pension and health plans.
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Chao v. Agway Inc. Employees' 401(k) Thrift Plan ERISA Litigation - formerly Chao v. Magnuson
Civil Action Number 5:06-CV-1199
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