Fact Sheet: Retirement Security Initiatives

The Labor Department's Employee Benefits Security Administration (EBSA) is committed to safeguarding employee contributions to 401(k) plans and health care plans by investigating situations in which employers improperly delay forwarding employee contributions to the appropriate funding vehicle or simply convert the contributions to other non-plan uses. Either or both scenarios may occur when the employer is having financial problems and turns to the plan as a source of financing.

401(k) Initiative Cumulative Statistics (as of 09/30/08)
Fiscal Year	Civil Cases Closed	Civil Cases Closed With Violations	Criminal Cases Closed	Criminal Indictments	Monetary Results
1995*	95	34	5	7	$1,320,308
1996	458	146	8	14	$8,039,957
1997	823	388	10	21	$28,176,814
1998	824	461	30	16	$13,989,075
1999	852	625	23	17	$19,366,568
2000	1,025	840	27	21	$27,882,270
2001	1,150	893	23	8	$28,828,131
2002	1,317	1,045	20	15	$42,833,078
2003	1,364	1,157	20	8	$135,528,157
2004	1,591	1,269	21	10	$31,636,501
2005	1,480	1,280	35	18	$42,808,668
2006	1,306	1,122	29	17	$36,566,477
2007	1,298	1,107	28	24	$51,294,250
2008	1,232	1,072	39	17	$24,863,198
*The first year that EBSA began to emphasize 401(k) abuse as a national enforcement initiative.

On September 8, 2008, in Chao v. Timothy Glinke, the U.S. Department of Labor obtained a consent judgment against Timothy Glinke, president of Control Pak International, Inc. The judgment requires Glinke to restore $19,165 in employee contributions plus interest to the company’s 401(k) plan. The Department alleged that Glinke violated the Employee Retirement Income Security Act (ERISA) by failing to timely remit employee contributions to the 401(k) plan from December 2001 through July 2003.

On September 4, 2008, in Chao v. Gerard D. Conway, the U.S. Department of Labor obtained a consent judgment against G. Conway Inc. and corporate officers Gerard D. Conway and Robert Conway. The judgment requires the defendants to repay $72,803 plus interest to the company’s 401(k) plan. The Department alleged that the defendants violated the Employee Retirement Income Security Act (ERISA) by failing to remit employee contributions withheld from employees’ paychecks between April 23, 2005, and May 12, 2007. Instead, the defendants allegedly used the withheld employee contributions to satisfy the obligations of the company. In addition, the judgment also orders the defendants to properly distribute the assets of the plan to plan participants and beneficiaries, and to terminate the plan. Gerard D. Conway also is permanently prohibited from serving as a fiduciary to any ERISA-covered plan.

On June 26, 2008, in Chao v. Haik, the U.S. Department of Labor obtained a consent judgment requiring two officers of defunct New York City and Santa Monica, California-based textile companies American Fabrics Co. and Beverly Trimming Co. to restore over $111,260 to the companies’ 401(k) plan. The consent judgment orders plan trustees Richard Haik and Mitchell Ostrover to restore to the plan $111,260 plus lost opportunity costs owed to the plan. The defendants were also ordered to appoint Jacqueline Carmichael of JM Pension Advisory Inc. as the plan’s independent fiduciary responsible for plan management, termination of the plan and distribution of its assets to eligible participants and beneficiaries. In addition, the defendants are permanently barred from serving as fiduciaries to any ERISA-covered plan. The Department alleged that Haik and Ostrover violated ERISA by failing to remit to the plan contributions and loan repayments deducted from employees’ paychecks between January 2002 and December 2003.

On July 1, 2008, in Chao v. Sharon Scherkoske, the U.S. Department of Labor obtained a consent judgment restoring more than $25,000 owed to the Tana Corporation Retirement Savings Plan. The order requires the company and plan fiduciary Scherkoske to repay $19,271 in delinquent employee contributions plus lost opportunity costs to the plan. The Department alleged that the company and Scherkoske violated the Employee Retirement Income Security Act (ERISA) by failing to remit employee contributions to the plan, instead using those contributions for the company’s benefit.

On September 9, 2008, Barry R. Stokes pled guilty to twenty nine counts of embezzlement from employee benefit plans, one count of mail fraud, two counts of wire fraud, six counts of money laundering and four counts of criminal contempt of court in U. S. District Court for the Middle District of Tennessee, Nashville Division. Stokes was president and CEO of 1 Point Solutions, LLC, a third party administration firm located in Dickson, Tennessee. 1 Point Solutions provided administration services to 401(k) plans as well as other employer sponsored employee benefit plans. As part of its services, 1 Point Solutions collected employee contributions for client plans which were meant to be invested in 401(k) accounts of plan participants. Instead, Stokes used the plans' funds for his personal and business purposes including his use of funds to purchase an extensive Japanese art collection. The total amount of the amount of funds Stokes embezzled exceeded $14 million.

On June 23, 2008, Christian D. McIntire, owner of Atlantic Capital Management, Inc. (“Atlantic”) pled guilty in the United States District Court for the Western District of North Carolina Charlotte Division to a two count Information for embezzling assets of an employee benefit fund and failing to disclose on his 2001 Federal tax return approximately $60,850 in income. Atlantic was a third party administrator (“TPA”) to several employer sponsored 401(k) plans in the Charlotte, NC area. Atlantic collected contributions on behalf of the plans and would then forward them to American Funds. The plan contributions were then invested through American Funds. It was McIntire’s scheme, in part, to request distributions from plan participant accounts from American Funds without the knowledge of plan participants. American Funds would then issue checks in the name of plan participants and mail them to McIntire. McIntire would then deposit the checks into his or Atlantic’s account and use the funds for Atlantic’s or his own personal benefit.

On July 17, 2008 David Jacobs was sentenced to 46 months imprisonment, three years of supervised released and ordered to pay court ordered restitution of $832,890 in United States District Court, Northern District of Illinois, Eastern Division. Jacobs had previously pled guilty to stealing funds from an employee benefit plan, in violation of 18 USC 664. Jacobs was the owner, operator and President of Northwestern Plating Works, Inc. (“NPW”), located in Chicago, Illinois. NPW was in the business of metal finishing. From September 2001, to March 2005, Jacobs withdrew money from the NPW Profit Sharing Plan (the Plan). In total, Jacobs wrote 49 checks from the Plan’s account at Morgan Stanley, totaling $832,890.84. The checks ranged in amounts from $5,000 to $60,000. The checks were first deposited into Jacobs’ personal bank account and then transferred to the NPW operating account. Jacobs was the sole trustee of the Plan. NPW went out of business in August 2005.

On May 5, 2008, Ronald Dale Patterson, age 64, was sentenced to a 4-year deferred adjudication by the Harris County District Court in Texas. Patterson was previously indicted and on January 24, 2008, entered a plea of no contest to one count of Misapplication of Fiduciary Property. Patterson was the President of Ronnie’s Food Markets and Trustee of the Ronnie’s Food Markets Profit Sharing Plan (the “Plan”). Between the period of January 10, 2002 and May 3, 2003, Patterson misapplied plan assets totaling $37,990.43 from the Plan’s bank account by writing checks to himself and paying personal expenses.

On January 22, 2008, William B. Wofford was sentenced to 51 months imprisonment followed by36 months probation and ordered to pay restitution of $277,938. On August 24, 2007, William B. Wofford, age 47, was convicted by a jury trial in the United States District Court, Northern District of Texas of 10 counts of Theft or Embezzlement from an Employee Benefit Plan. Wofford was the owner of Premier Consulting, Inc., (Premier) that sponsored the Premier Employers Group 401(k) Plan. Premier was a company that was in the business of leasing employees back to the companies for which the employees worked. Companies that hired Premier would no longer employ their own workers. Instead, Premier would employ the workers, and the clients of Premier would then lease the employees back from Premier. One of the benefits Premier offered was a 401(k) plan, known as the Premier Employer’s Group 401(k) Plan. From April 2002 through October 2004, Wofford directly and indirectly borrowed, withdrew and used, for his own use and benefit and for the use and benefit of companies and entities in which he had a financial interest, over $300,000 from the Plan.

On November 16, 2007, Thomas E. Zimmer was sentenced in the United States District Court for the Northern District of Ohio, to 2 years of supervised probation, 6 months of home confinement and, fined $1,000 with a special assessment of $100. On October 3, 2007, Zimmer plead guilty to one count of theft or embezzlement from an employee benefit plan in violation of Title 18 USC 664. Zimmer was 60 % owner of Allied Construction Group, Inc. and plan administrator of the company's 401(k) Plan covering employees of the Company. During the period May 3, 2002 - January 31, 2003 Zimmer withheld $10,692 from the pay of employees as contributions to the Company 401(k) Plan, but, failed to remit these withholdings to the plan's custodian of assets. Instead, he deliberately chose to spend these funds held by the company for business or personal purposes.

The Department’s participant contribution regulation requires employers of all sizes to transmit employee contributions to pension plans as soon as they can be segregated, but in no case later than the 15th business day of the month immediately following the month in which the contribution is either withheld or received by the employer. The Department proposed an amendment to the participant contribution regulation to create a safe harbor rule under which participant contributions to small plans (with fewer than 100 participants) will be deemed to be made in compliance with the law if those amounts are deposited with small plans within seven business days of withholding or receipt. Pending the adoption of a final rule by the Department, EBSA will not assert a violation of ERISA regarding participant contributions where such contributions are deposited with a small plan within 7 business days. Because the final rule may change, periodically check www.dol.gov/ebsa for the publication of the final rule.

EBSA adopted the Voluntary Fiduciary Correction Program (VFCP) to encourage employers and fiduciaries to comply with ERISA. This program allows plan officials to self correct certain violations and receive “no action” letters if they meet certain criteria. Most of the VFCP applications involve delinquent employee contributions. As VFCP applications continue to increase, fewer investigations involving these issues need to be conducted in order to correct violations. Since the VFCP was adopted on a permanent basis in March 2002, EBSA has received more than 5,300 applications and verified $439 million in corrections on behalf of plans and their participants.

This fact sheet has been developed by the U.S. Department of Labor, Employee Benefits Security Administration, Washington, DC 20210. It will be made available in alternate formats upon request: Voice phone: 202.693.8664; TTY: 202.501.3911. In addition, the information in this fact sheet constitutes a small entity compliance guide for purposes of the Small Business Regulatory Enforcement Fairness Act of 1996.