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Archived News Release Caution: Information may be out of date. Archived News Release Caution: Information may be out of date.
For more information call: (202) 219-8921
The U.S. Department of Labor is suing the Bank of America
for a $3.3 million investment on behalf of two pension plans for a San
Francisco Bay firm, Norcal Waste Management, Inc.
The lawsuit seeks to have Bank of America restore to the
plans all losses resulting from its breaches of the Employee Retirement Income
Security Act and to be barred from serving as a trustee for any ERISA-covered
plan.
The plans cover 3,500 employees of the firm.
Secretary of Labor Robert B. Reich said, "Working people
across America depend on professional trustees like the Bank of America to
maintain the security of their retirement income. It is distressing to learn
that the Bank of America -- a large institution that should be an industry
leader -- may have jeopardized retirement benefits of hundreds of Norcal's
employees by flouting the strict standards designed to safeguard those
benefits."
As trustee of Norcal's defined benefit plans, Bank of
America allegedly allowed the plans to use plan assets to buy $3,346,693 in
common stock in Techno-Therm, Inc., a company manufacturing space heaters in
Colorado.
According to information available prior to the common
stock purchase, Techno-Therm was in precarious financial condition. By August
1991, less than two years after the plans' stock purchase, the value of the
plans' total investment in Techno-Therm fell to $2 ($1 per plan) and, in
February 1993, Techno-Therm filed for bankruptcy.
Moreover, the Techno-Therm stock was purchased on the
condition that the plans' investment would be used to repay a $1 million debt
of Daniel Horst, Techno-Therm's president and owner, to Consolidated
Environmental Industries, Inc., a wholly-owned Norcal subsidiary. Such use of
plan assets is prohibited by ERISA.
The lawsuit alleges that Bank of America negligently
failed to investigate the relationship between the plans, Norcal and
Consolidated, which it should have known about because of its status as a
long-time senior lender to Norcal. Consolidated had borrowed $1 million from
Norcal and then loaned the money to Horst.
The lawsuit against Bank of America is the result of an
investigation of the San Francisco office of the department's Pension and
Welfare Benefits Administration into alleged violations of federal pension law.
It was filed Feb. 14 in federal district court in San Francisco.
(Reich v. Bank of America) Civil Action #
96-0583CAL
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This information will be made available to sensory impaired
individuals upon request. Voice phone call (202) 219-8921, TDD phone
1-800-326-2577.
U.S. Department of Labor news releases are accessible on
the Internet at: http://www.dol.gov/
Archived News Release Caution: Information may be out of date.
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