Engineering Executives Ordered To Repay Company Pension Plan

Archived News Release — Caution: Information may be out of date.

A federal court ordered a Norcross, Ga. couple to pay $66,472 over four years to a pension plan sponsored by the Harris Engineering firm as restitution for using the plan’s assets to make a series of imprudent loans to friends and associates.

William H. Harris, Jr. and his wife Geneva C. Harris, the president and secretary/treasurer, respectively, of the Harris Engineering Corp., also were removed from their positions with the plan and barred from serving any other plan subject to the Employee Retirement Income Security Act (ERISA).

The court also named Larry Lefoldt of Lefoldt & Company of Jackson, Miss. as the plan’s independent fiduciary to manage the plan’s assets and distribute them to the participants and beneficiaries. The court gave Lefoldt the authority to liquidate the holdings of the Crow Mountain General Partnership, an interest currently held by the plan, to accomplish his charge. Additionally, the Harrises agreed to waive any claims to benefits from the plan as participants.

According to the Labor Department’s lawsuit, the plan has not received contributions since 1990. The plan, funded through employer and employee contributions, covered nine participants and had $181,540 in assets at the end of 1994.

The Labor Department’s allegations against the Harrises and their company mainly related to the illiquidity of the plan assets to pay promised benefits and self-dealing activities which benefitted the couple and their company and not the plan’s other participants.

The lawsuit alleged that William Harris made eight unsecured loans totaling $108,700 to various friends and businesses associates and also purchased stock in a jewelry company in the plan’s name. When the loans were not repaid, he placed a personal hand-written note payable to the plan for $118,700 for these loans, while acquiring the loans and stock.

The Harris “IOU” was not repaid to the plan, according to the department’s lawsuit. A further drain on the plan allegedly occurred when the plan needed to liquidate assets to make distributions. At the time, the plan held stock in various banks, valued at $33,673, which Mrs. Harris purchased by obtaining a loan for $42,000 secured by the stock and some real estate. Over time Mrs. Harris allegedly had personal possession of the stock and ultimately sold it for $90,849, realizing a net gain of $57,176. The proceeds should have been credited to the plan.

Currently, all that remains in the plan is a 10.31% general partnership in Crow Mountain, a business developing real estate for retirement and vacation homes. From 1992 through 1996, the partnership, for which the plan paid $25,000, experienced a negative rate of return and is only now valued at $4,000, considerably less than the plan’s original investment of $25,000.

The lawsuit, entered Dec. 11 in the federal district court in Atlanta, resulted from an investigation by the Labor Department’s Atlanta Regional Office of the Pension and Welfare Benefits Administration, which enforces ERISA.

(Herman v. Harris Engineering, et al)
Civil # 1:98-CV-0285

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

Contact Name: Sharon Morrissey
Phone Number: 202.219.8921