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Release Date: February 5, 2009
Release Number: 09-111-NEW/BOS 2009-032
Contact Name: John M. Chavez
Phone Number: 617.565.2075
Syracuse, New York – The U.S. Department of
Labor has sued Kellogg Auto Supply Co. Inc. of Cortland, New York, and
company president and general manager Richard Coates for alleged
violations of the Employee Retirement Income Security Act (ERISA), the
federal law that protects private sector pension and employee benefit
plans.
An investigation by the Labor Department’s Employee
Benefits Security Administration (EBSA) Boston Regional Office
determined that the defendants failed to carry out a key requirement of
the Kellogg Auto Supply Co. Inc. Employee Stock Ownership Plan.
The plan is an employee stock ownership arrangement
sponsored and administered by the company. The plan document sets forth
the requirements that allow participants to receive a distribution based
on the then-current value of the company’s stock. It mandates that, in
the event any participant is entitled to a distribution in a given
calendar year, a valuation of the stock is to be conducted based on the
company’s performance during the prior calendar year.
The Labor Department investigation found that, during
the period 1999 through 2008, a number of participants were entitled to
distributions, but the defendants only caused a valuation of Kellogg
stock based on its performance in calendar year 1998, and no further
valuations were conducted by the defendants until 2008. As a result, at
least nine eligible plan participants failed to receive proper
distributions from the plan.
“Such a breach of trust and violation of the law
will not be tolerated by the Labor Department,” said Jean Ackerman,
the regional director for EBSA in Boston.
The Labor Department’s lawsuit, filed in the U.S.
District Court for the Northern District of New York, alleges that both
Coates and the company, as fiduciaries for the plan, failed to have the
company’s stock valuated during the stated period, thus depriving plan
participants and beneficiaries of benefits due them.
The suit asks the court to enter an order requiring
the defendants to restore all losses, plus interest or lost opportunity
costs; permanently enjoining the defendants from serving as fiduciaries
or service providers to any ERISA-covered plan; ordering an accounting
of the financial status of the plan; and appointing an independent
fiduciary to conduct the affairs of the plan, including commissioning a
valuation of Kellogg’s stock for the years 1999 to the present.
Workers and employers can contact EBSA’s Boston
Regional Office at 617.565.9600 or toll-free at 866.444.3272 for help
with problems relating to private sector pension 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. Additional information about the agency is
available at www.dol.gov/ebsa.
Secretary of Labor v. Richard Coates
Civil Action Number: 3:09-CV-109
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placing your request at 202.693.7828 or TTY 202.693.7755. The Labor Department is committed to providing America's employers and
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with its laws and regulations. For more information, please visit the
Department's Compliance
Assistance page.
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