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Release Date: December 26, 2006
Release Number: 06-2104-NEW/BOS 2006-365
Contact Name: John M. Chavez
Phone Number: 617.565.2075
New York - The U.S. Department of Labor has
sued defunct New York City and Santa Monica, California-based textile
firms American Fabrics Co. and Beverly Trimming Co., as well as two
officers of the companies, for failure to forward more than $100,000 in
employee contributions and loan repayments owed to the American Fabrics
Co. 401(k) Savings Plan.
The lawsuit alleges that the companies and officers
Richard Haik and Mitchell Ostrover violated the Employee Retirement
Income Security Act (ERISA) by failing to remit to the plan
contributions and loan repayments deducted from employees’ paychecks
between January 2002 and December 2003. Both Haik and Ostrover were
considered to be fiduciaries to the plan.
The suit, filed on December 21, 2006, in the U.S.
District Court for the Southern District of New York, asks the court to
order Haik and Ostrover to restore to the plan all losses resulting from
their improper actions plus interest and to require them to forfeit any
account balances they have with the plan. It also seeks to remove them
as plan fiduciaries, to permanently bar them from service to ERISA-covered
plans in the future, and to require American Fabrics and Beverly
Trimming to correct their prohibited transactions. In addition, the law
suit requests appointment of an independent fiduciary to oversee the
plan.
American Fabrics, which also had operations in
Bridgeport, Connecticut, and Bogalusa, Louisiana, ceased operations this
past summer. Beverly Trimming ceased operations in 2004. The American
Fabrics Co. 401(k) Savings Plan covered approximately 106 participants
from both companies and held $821,139 in assets as of June 30, 2006.
“The law is clear,” said Jonathan Kay, regional
director in New York for the Labor Department’s Employee Benefits
Security Administration (EBSA). “When a company sponsors a plan to
benefit employees, it cannot use plan assets for any other purpose.
Employee contributions and loan repayments withheld from employee
paychecks must be forwarded to the plan without delay.”
Employers in danger of committing similar violations,
who are not yet the subject of an investigation by EBSA, may be eligible
to participate in the department's Voluntary Fiduciary Correction
Program (VFCP). Participation in the VFCP requires employers to make
workers whole but allows them to avoid EBSA enforcement actions, civil
penalties and any applicable excise taxes. For more information see
www.dol.gov/ebsa.
The investigation of this case was conducted by the
New York regional office of EBSA and the lawsuit was filed by the Labor
Department’s regional Solicitor of Labor’s office in New York City.
Employers and workers can contact the New York EBSA office at
212.607.8600 or may call EBSA’s toll-free number 1.866.444.EBSA (3272)
for help with any problems relating to private-sector pension and health
plans.
(Chao v. Richard Haik)
Civil Action Number: 06-CV-15359
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