The U.S. Department of Labor has filed suit
against Central Scale Company of Warwick, Rhode Island, as well as the
President and Vice President of the company, alleging misuse of funds belonging
to the companys employee profit sharing plan.
According to James Benages, New England Regional
Director of the Labor Departments Pension & Welfare Benefits
Administration (PWBA), his agency has filed suit in the U.S. District Court for
the District of Rhode Island against the company, as well as Robert Geisser,
President, and Matthew Geisser, Vice President, who are both Trustees of the
Central Scale Profit Sharing Plan. He noted that the suit also names a relative
of the trustees as a party in interest who the other defendants allowed to
receive an illegal loan from the plan.
Benages noted that Central Scale Company is
located at 2027 Elmwood Avenue, Warwick, Rhode Island, and is in the business
of calibrating, repairing and distributing scales and material handling
equipment. The profit sharing plan was established for the benefit of company
employees on March 1, 1979.
He indicated that the Labor Department suit
alleges that Robert Geisser and Matthew Geisser, who are brothers, misused
their discretionary authority over the assets of the plan by causing the plan
to make a loan to a relative in the amount of $80,000 without proper
documentation, appraised collateral, or repayment terms; and failed to take
appropriate steps to collect any interest or principal on the loan. The suit
alleges the Geissers also caused the plan to continue to hold a similarly
unsecured and uncollected loan to two friends of Matthew Geisser in the amount
of $111,931.19; caused the plan to buy and sell highly speculative, high risk
stocks, which were traded among the plan, the company and Matthew Geisser; and
made unexplained withdrawals from plan accounts.
Benages stressed that the federal law which
protects private employee benefit plans, including profit sharing plans, known
as the Employee Retirement Income Security Act (ERISA), specifically requires
plan officials to administer such plans solely in the interest of the
participants and beneficiaries, for the exclusive purpose of providing benefits
to those participants and their beneficiaries.
In this case, said Benages, it
would appear that the defendants thought of their employees profit
sharing plan as their own private bank account to do with as they pleased. The
blatant misuse of plan funds in this case it totally inexcusable, unacceptable
and clearly in violation of federal law.
Benages noted that the Departments lawsuit
asks the court to permanently enjoin the defendants from future violations of
ERISA; permanently prohibit Robert Geisser and Matthew Geisser from ever again
serving as fiduciaries to an ERISA covered plan; remove both individuals as
trustees of the company plan; appoint an independent trustee to hold and invest
the assets of the plan; require the defendants to undo all prohibited
transactions; and require them to disgorge all profits gained as result of
their illegal actions, as well as to pay back to the plan all losses which
resulted from their fiduciary breaches. The suit also asks the court to require
the trustees relative to undo the prohibited transactions in which she
engaged and restore to the plan all principal and lost interest.
What we are talking about here, said Benages,
is a breach of trust. And those institutions and individuals holding
positions of trust with respect to employee benefit plans of any kind must be
aware of their responsibilities under the law. Plan funds must be used only for
the benefit of participants and beneficiaries, not for the benefit of those
administering the plan. Misuse of plan funds for any other purpose will not be
tolerated.
In November, 1999, the Trustees of the Plan
entered into an agreement with the Department of Labor to voluntarily turn over
the Plan assets to an independent investment manager in order to protect the
interests of the participants.
The legal action against the defendants resulted
from an investigation by the Pension and Welfare Benefits Administration. The
agencys New England regional office is located in the John F. Kennedy
Federal Building in Boston. The phone number is 617-565-9600. The civil action
file number for this case is 00525T. |