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Release Date: January 12, 2009
Release Number: 08-1823-ATL (005)
Contact Name: Michael Wald
Phone Number: 404.562.2078
Atlanta – The U.S. Bankruptcy Court for the
District of South Carolina has agreed with U.S. Labor Department that
Carl E. Reid may not use bankruptcy to avoid repaying $44,993 plus any
lost earnings to the SIMPLE IRA plan of American Fittings Inc.
The bankruptcy court ruled that the defendant is
obliged to repay the funds because his conduct constituted fraud while
acting as a plan fiduciary. American Fittings manufactured stainless
steel tube fittings in Travelers Rest, South Carolina, until it ceased
operations in 2004.
Reid petitioned the bankruptcy court to discharge
debts owed to the plan under Chapter 7 of the Bankruptcy Code. If
granted, the discharge releases individual debtors from personal
liability for most debts and prevents the creditors owed those debts
from taking any collection actions against the debtor.
In November, a federal district court in South
Carolina ordered Reid to make restitution to participants in the
company’s SIMPLE IRA plan. The ruling resulted from the court’s
finding that the defendant breached his fiduciary responsibilities when
he withheld employee plan contributions from August 2003 to December
2004 but never forwarded them to the plan.
“Plan officials should not take false solace in the
belief that filing for bankruptcy forgives all prior obligations and
debts,” said R.C. Marshall, regional director of the department’s
Employee Benefits Security Administration (EBSA) office in Atlanta.
“This ruling demonstrates that fiduciaries who misuse pension funds
are still liable for their past actions even when they file for
bankruptcy.”
This case resulted from an investigation conducted by
EBSA’s office in Atlanta. Employers and workers can reach the Atlanta
office at 404.302.3900 or toll-free at 866.444.3272 for help with
problems relating to private sector retirement and health plans.
In fiscal year 2008, EBSA achieved monetary results
of $1.2 billion related to pension, 401(k), health and other benefits
for millions of American workers and their families.
Chao v. Carl E. Reid
Civil Action File Number 08-02423-hb
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