Mid-Cities Association for Retarded Children Benefit Plan Suffers Losses from Violations of Federal Pension Law

Archived News Release — Caution: Information may be out of date.

Contact Name: Sharon Morrissey
Phone Number: 202.219.8921

A lawsuit has been filed by the U.S. Department of Labor against the Mid-Cities Association for Retarded Children in Compton, Calif. and its principals in connection with the operation of its defined benefit retirement plan.

The complaint alleges that Mid-Cities, its executive director and plan trustee John Wagoner and his wife, Irma Wagoner, who also was a plan trustee, have failed to keep required records pertaining to plan assets and engaged in prohibited transactions with plan assets in violation of the Employee Retirement Income Security Act of 1974 (ERISA) and the plan's own documents.

According to the complaint, records provided to the department's Pension and Welfare Benefits Administration, which enforces ERISA, failed to substantiate the value of the plan assets reported on the plan's Forms 5500. The lawsuit seeks the verification of plan assets and their value through a formal equitable accounting.

The complaint also alleges that the defendants improperly administered the plan by making distributions to plan participants, including Irma Wagoner, contrary to the plan's own eligibility criteria, and by transferring plan funds to Mid-Cities, all of which constitute prohibited transactions under ERISA. While the illegal cash loans to Mid-Cities may have been repaid, no interest was charged and no agreement for the repayment of the transfers has been produced by the defendants.

The lawsuit seeks to have the Wagoners permanently barred from serving any plan governed by ERISA and that they provide a formal equitable accounting to the Secretary of Labor and the court. The department also seeks the restoration of all losses including lost opportunity costs, the appointment of an independent trustee with full discretionary authority to administer and manage the plan, and an order that the Wagoners cooperate with the independent trustee by making all books and records available.

The plan, which had 39 participants and $1,638,789 in assets in December 1994, provided for distribution of retirement benefits when participants retired, became totally and permanently disabled, died or terminated employment. Plan documents set normal retirement age as the later of the participant's 65th birthday or the 10th anniversary of the first day the employee began participation in the plan. It did not provide for an early retirement provision.

The investigation was conducted by PWBA's Los Angeles regional office. The lawsuit was filed April 9 in federal district court in Los Angeles.

(Metzler v. Wagoner)
Civil Action #97-2361-JNI(Mc)

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