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Release Date: 03/24/2000 Release Number: 99 -
57 Contact Name: JOSEPH MENEZ 606.578.4680 GLORIA DELLA
202.219.8921
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Plan officials of the Radac Corp. Employee Stock
Ownership Plan (ESOP) of Dayton, Ky., were sued by the U. S. Department of
Labor for allegedly distributing plan assets to participants other than
themselves which were based on an undervaluation of Radac stock held by the
plan. |
Besides Radac Corp., individual defendants are
Richard L. Morris the president of the company and corporate
officers H. Thomas Smith, James E. Cornwell and Joseph C. VonLehman, Jr..
Smith, Cornwell and VonLehman were members of the ESOPs Advisory
Committee. Morris served as the ESOPs plan administrator. |
According to the lawsuit, the ESOP officials
violated their duties under the Employee Retirement Income Security Act (ERISA)
when they:
- liquidated the plans stock held and distributed cash to
129 participants other than themselves based on an inaccurate valuation
conducted by Business Valuations, Inc.;
- retained their stock holdings in lieu of a cash distribution
and finalized a buy/sell agreement just 9 days later which resulted in a higher
valuation of company stock held by them;
- failed to take steps or follow procedures to determine the
fair market value of the stock held by the ESOP.
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These defendants elected to retain company stock
rather than take a cash distribution from the ESOP. Nine days after making a
distributions to all other participants, the defendants received a buy/sell
agreement valuing the shares of company stock at a much higher amount than the
$32.26 share price distributed to participants. |
The Labor Departments lawsuit also alleges
that the defendants should have known that the valuation was inaccurate because
of the increased growth by the company and the exclusion of $2 million in
assets received on the sale of an industrial revenue bond from the earlier
valuation. |
The lawsuit seeks a court order to require that
the defendants restore all losses with interest and correct any transactions
prohibited by ERISA. The department also asks the court to permanently bar the
defendants from serving in positions of trust to any plan governed by federal
pension law. |
Joseph Menez, Cincinnati Regional Director of the
Pension and Welfare Benefits Administration, said, This case reaffirms
our commitment to protect workers and their benefits from abuse wherever and
whenever it occurs. Workers also can help us protect plan benefits by
contacting our office at 606-578-4680 about any suspected abuse of their
pension, health or other benefit plans. |
The lawsuit was filed on March 23 in federal
district court in Covington, Ky. The case was investigated by the Cincinnati
Regional Office of PWBA into alleged violations of ERISA. |
(Herman v. Radac Corp.) Civil Action No.
2000-52 |
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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