Labor Department Sues Sutersville Lumber Company Pension Plan Officials And Investment Manager

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor today filed a lawsuit against trustees of two pension plans sponsored by the Sutersville Lumber Company for violating federal pension law by transferring over $500,000 in profit sharing plan assets to the company to pay off a bank loan, which is guaranteed, to its employee stock ownership plan (ESOP).

The lawsuit also named the profit sharing plan’s former investment manager, Radnor Capital Management Inc. of Radnor, Pa. and one of its principals, Pierce Archer, for allowing the prohibited transfer to pay off the bank loan.

Named defendants are Jay Miller, Richard Nesbit and Rona Nesbit, daughter of Richard Nesbit and niece of Miller. She filed for bankruptcy Dec. 8, 1998; however, the department has petitioned a federal bankruptcy court to prevent her from discharging in bankruptcy her debts owed to the plans.

The company, which went bankrupt and was liquidated in 1997, was a family-owned lumber yard and home improvement center located in Sutersville, Pa. It established a profit sharing plan for all of its employees in 1976 and an employee stock ownership plan in 1987. Sutersville purported to merge the two plans in 1993. After the plans merged, combined plan assets totaled $3,096,814.

When Jay Miller retired, trustees allegedly sold marketable securities held in other participants’ self-directed individual accounts to pay him the value of his Sutersville stock. Eventually he was paid a total of $814,710. At about the same time, allegedly five other participants retired and requested their benefits. Again, the trustees allegedly sold marketable securities held in other participants’ accounts to pay retiring participants the value of their Sutersville stock in cash.

And, finally, the ESOP allegedly was further depleted when Rona Nesbit took an in- service withdrawal of $25,000 even though her account balance contained only company stock and Richard Nesbit, who also retired, withdrew approximately $350,000 from his account. According to the lawsuit, Richard Nesbit has not received his entire account balance and the trustees are unable to pay any benefits to the plan’s remaining 12 participants.

Allegedly, the ESOP has approximately $75,000 in cash and marketable securities and the 12 participants are owed over $475,000 plus lost opportunity costs.

The Labor Department is seeking to remove the defendants from any positions with the plan, to permanently bar them from serving these or any other employee benefit plans under the Employee Retirement Income Security Act (ERISA), and to require that the defendants restore to the plans all losses, plus lost opportunity costs. It also seeks to have an independent fiduciary named by the court to administer the plan and, as necessary, to set off the defendants’ individual accounts against the losses and redistribute them to other remaining plan participants.

The lawsuit is a result of an investigation conducted by the Philadelphia Regional Office of the Department’s Pension and Welfare Benefits Administration into alleged violations of the ERISA. It was filed in federal district court on March 15 in the federal district court in the Western District of Pennsylvania in Pittsburgh.

Herman v. Sutersville
(Civil Action # 90-904)

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

Contact Name: Sharon Morrissey
Phone Number: 202.219.8921