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Release Date: Release Number: 00-52
Contact Name: Sharon Morrissey Phone Number :202.219.8921 |
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The U.S. Department of Labor has sued a
Birmingham, Ala. businessman and his companies for causing their profit sharing
plan to lose more than half of its assets because of the officials
investments in high risk securities, call options and warrants. |
The defendants are Tim A. King of Birmingham, plan
trustee, and his company, First Capital Mortgage Corporation (FCMC), a mortgage
broker with 14 offices in six states and approximately 50 employees. FCMC
ceased operations in 1999. King also owns or owned 50 percent or more of the
stock in American Mortgage of Shreveport, La. (AMS), a mortgage originator, and
First Capital Insurance of Birmingham, an insurer of credit life insurance to
FCMC. These companies are considered by the Labor Department to be
parties-in-interest. |
More than 30 affected participants in the depleted
plan worked for King at FCMC and AMS. The plan, with assets of $502,361
as of Dec. 31, 1994, was funded by discretionary contributions by FCMC.
Employee contributions were not permitted. |
According to the lawsuit, from May 31, 1994 to May
31, 1995, Kings investment decisions created a high potential for loss
and allegedly resulted in net losses to the plan, with its assets totaling
$192,493 as of May 31, 1995. In its review of the defendants investment
transactions for plan years 1994 and 1995, the department found multiple
purchases and sales of various stocks valued at less than $2 per share, with
the resultant losses reported. |
The department is seeking to have the court
require the defendants to restore all losses including interest to the plan,
remove FCMC and King from their positions of trust to the plan and permanently
bar them from serving as fiduciaries to or having control over the assets of
any employee benefit plan subject to the Employee Retirement Income Security
Act (ERISA). |
The lawsuit also asks the court to appoint a
successor trustee/administrator to marshall the plans assets, to
distribute them and to terminate the plan, if necessary. In addition, the
lawsuit is asking that the plan set off Kings individual plan account
against the losses if they are not otherwise restored by the
defendants. |
In the departments lawsuit, it also alleged
that on Feb. 27, 1997, King and FCMC entered into an out-of-court settlement
with a former employee/plan participant in which plan assets were used to pay
$30,000 plus interest to the participant and $10,000 to his attorney. |
The legal actions pertaining to the pension plan
resulted from an investigation conducted by the Atlanta Regional Office of the
departments Pension and Welfare Benefits Administration into alleged
violations of the federal pension law. The lawsuit was filed in the federal
district court in Birmingham on March 6, 2000. |
(Herman v. First Capital Mortgage Corporation and
Tim A. King, an Individual ) Civil Action No. CV-00-BU-557-S |
U.S. Department of
Labor news releases are accessible on the Internet. The information in this
news release will be made available in alternate format upon request (large
print, Braille, audio tape or disc) from the Central Office for Assistive
Services and Technology. Please specify which news release when placing your
request. Call 202.693.7773 or TTY 202.693.7775. |
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Archived News Release Caution: Information may be out of date.
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