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Release Date: 05/04/1998 Release Number:
Philadelphia USDL: III 98-015-04-083PHL Contact Name: Sharon Morrissey
Phone Number: 202.219.8921 |
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Philadelphia-based Mercy-Douglass Corp., its subsidiaries and
trustees of the company's pension plan have agreed to repay the plan $432,137,
including interest, as a result of a consent judgment obtained by the U.S.
Labor Department. |
In addition, the consent judgment
requires that an independent trustee be appointed to manage the plan. |
The individual defendants were ordered to resign their positions
as plan trustees They were also barred from serving in any capacity to plans
governed by federal pension law for three years except defendant James Wilson
who was barred for 10 years. In addition, the defendants agreed to participate
in comprehensive training regarding the duties and responsibilities of trustees
and fiduciaries of any plan governed by the Employee Retirement Income Security
Act (ERISA) before re-assuming any fiduciary duties with the plan. Defendants
also have been ordered to pay the federal government a civil penalty of
$86,424. The consent judgment also required that the defendants obtain an
irrevocable letter of credit in the amount owed the plan, guaranteeing that the
plan will be paid in the event they default on the required payments. |
According to the lawsuit, the defendants misused more than $1.3
million in pension assets as corporate loans and contributions owed by the
nursing home operator and its subsidiaries. Mercy-Douglass (MDC) is the parent
holding company for four non-profit subsidiaries which serve elderly residents
in the Philadelphia area. These services include two nursing homes, provisions
of medical services, recreational activities and transportation. MDC and its
subsidiaries sponsor the pension plan for as many as 429 participants. In 1994,
the plan had approximately $1.2 million in assets. |
Named in the lawsuit were MDC and its subsidiaries, Mercy-Douglass
Human Service Affiliate, Mercy-Douglass Human Services Corp., Mercy-Douglass
Center Inc., and MercyDouglass Inc. II; as well as Wilson and other trustees
Elvis Malone, Beryl Fuller, Jeanice Salter, Charlotte Nichols and William
Reddish, who are also of ficers of MDC or one of its subsidiaries. |
According to the lawsuit, the trustees violated ERISA by:
- pledging more than $500,000 of plan money as collateral on a
series of loans to a division of Mercy-Douglass Inc.;
- making a $65,000 loan to Mercy-Douglass Human Services
Affiliate which· making a $65,000 loan to Mercy-Douglass Human Services
Affiliate which pledged real estate purchased with proceeds as collateral for
the loan;
- failing to collect fees owed to the plan as a condition of the
collateralized loans;
- making a $53,996 loan to a client of Mercy-Douglass Human
Services Affiliate in order to repay debts owed to MDC:
- using plan money to make a $13,800 loan to a MDC consultant;
and
- failing to collect more than $600,000 in contributions owed to
the plan by the subsidiaries.
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As a result of the department's intervention, MDC corrected most
of the alleged violations, therefore the remaining monies owed the plan were
for the balance of the delinquent contributions plus interest only. |
MDC was charged with knowingly participating in the improper
actions of the trustees, failing to monitor the trustees' actions and using
plan money for its own benefit. The subsidiaries were alleged to have
participated with the trustees and MDC in failing to collect contributions owed
to the plan and Mercy-Douglass Center allegedly participated in the unlawful
pledge of plan money to obtain loans for itself. |
The consent judgment was entered May 4 in federal district court
in Philadelphia and resulted from an investigation by the Philadelphia Regional
Office of the Department's Pension and Welfare Benefits Administration, which
conducts investigations into alleged violations of ERISA. |
(Herman v. Mercy-Douglass Corp. et al) Civil Action
#97-CV-2152 |
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 202.693.7755. |
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