Los Angeles Firm And Pension Plan Trustees Sued For Mismanagement Of Plan Assets

Archived News Release — Caution: Information may be out of date.

The U. S. Department of Labor has sued Mobile Medical Diagnostics, Inc. of Los Angeles and its pension plan trustees for more than $245,000 in improper plan transfers to benefit the company and for failing to collect employer contributions owed to the money purchase plan.

Mobile Med sponsored two pension plans — a money purchase plan and a profit sharing plan — which covered up to 17 participants. The money purchase plan was merged into the profit sharing plan in 1993. This successor profit sharing plan had assets of $335,735 as of Nov. 30, 1996.

The Labor Department lawsuit alleges that the company and trustees Stanley Shapiro and Michael Cohn caused the profit sharing plan to sustain losses on transactions between the plans and Mobile Med over the period July 1992 and August 1994. Shapiro and Cohn — who held the dual positions of plan trustees and owners of Mobile Med — represented the interests of both the plans as lenders and the company as borrower in making the plan transfers.

The lawsuit alleges that the defendants violated the Employee Retirement Income Security Act (ERISA) when:

• Shapiro made a series of improper transfers totaling $248,138 from the plans to Mobile Med without investigating alternative investments and without obtaining security for the transfers;
• Shapiro failed to collect employer contributions of $54,128 owed to the money purchase plan, of which $19,128 in outstanding contributions was still owed to the profit sharing plan after the plans were merged;
• Shapiro and Cohn failed to keep detailed records on all plan investments, receipts and disbursements; and
• Cohn knowingly participated in or failed to correct the improper plan transactions committed by Shapiro.

Mobile Med allegedly failed to monitor the actions of Shapiro and shares liability for any losses to the profit sharing plan.

The lawsuit seeks a court order to require that the defendants restore all losses with interest to the profit sharing plan, to appoint an independent trustee to manage the plan and to permanently bar the trustees from serving in any position of trust to plans governed by ERISA. It also asks the court to require that the trustees cooperate with the independent trustee by turning over all plan books and records.

The court action was filed on Feb. 5 in federal district court in Los Angeles. The case was investigated by the Los Angeles Regional Office of the department’s Pension and Welfare Benefits Administration into alleged violations of ERISA.

(Herman v. Mobile Medical Diagnostics, Inc.)
Civil Action No. CV-98-0911

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

Contact Name: GLORIA DELLA
Phone Number: 202.219.8921