Los Angeles - The U.S. Department of Labor
announced today a settlement agreement and consent decree was entered March 2,
2000, by the U.S. District Court for the Central District of California,
resolving a suit against Michael Howe, president and sole shareholder of Bakery
Industrial Services, Inc. (BIS), a Pasadena corporation, and the Bakery
Industrial Services, Inc., 401(k) Profit Sharing Plan for fiduciary duty
violations under the Employee Retirement Income Security Act (ERISA).
According to Billy Beaver, Los Angeles regional
director for the Pension and Welfare Benefits Administration here, defendant
Howe admitted liability for violations of ERISA which resulted in losses
totaling $12,947 plus interest to the employee benefit plan.
The Departments lawsuit, filed June 28,
1999, sought full restitution from Howe and BIS of all losses suffered by the
plan due to their alleged fiduciary breaches, including lost interest and lost
opportunity costs, Beaver said.
Under the terms of the plan, employees were
permitted to make contributions to the plan by designating amounts to be
withheld from their paychecks. From August 5, 1996, through June 15, 1997, BIS
withheld $12,447 from employees paychecks. However, these contributions
were not forwarded to the plan but were instead commingled with the general
assets of BIS.
Also, under the terms of the plan, participants
were permitted to borrow money from their accounts and to later repay such
loans by directing BIS to withhold money from their paychecks. BIS withheld
$500 designated for repayment of a loan from one employees paychecks but
did not forward any of the money to the plan, the Department had alleged.
As a result of the settlement, Howe agreed to pay
to the plan $13,535 to correct all prohibited transactions identified in the
Departments complaint and restoring all losses attributable to the
fiduciary breaches, including lost interest and lost opportunity costs.
Further, Howe agreed to resign from his position
as plan fiduciary in favor of an independent fiduciary who will have full
discretionary authority to administer the Plan. Howe also agreed to a permanent
injunction against serving as a fiduciary of or service provider to any plan
covered by ERISA.
On December 22, 1999, the Court entered a default
judgment against defendant BIS in the amount of $16,296.59. Defendant BIS filed
for bankruptcy protection and is being liquidated under Chapter 7.
This settlement agreement and consent decree
resulted from an investigation conducted by the Los Angeles Regional
Office of PWBA, headed by Beaver. It is part of an ongoing initiative to
insure compliance with ERISA fiduciary standards with respect to proper deposit
of employee contributions to 401(k) retirement plans.
Note to editors: Civil Action File Number 99-06643
GAF (Jwjx) (Alexis M. Herman, Secretary of the Labor, vs. Bakery Industrial
Services, Inc., et al) |