Labor Department Obtains Judgments Against Trustees In Lawsuit Over Pension Fund Misuse

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor obtained judgments against the defendants in a lawsuit it had filed against two former trustees of a Latrobe, Pa. retirement plan for misusing plan assets. A federal district court in Pittsburgh entered a default judgment May 17 against former plan trustee John P. Kokonaski, Jr., who failed to defend himself against the department’s lawsuit. Kokonaski allegedly used $275,000 of the plan’s assets for his own living expenses and for the company’s operating expenses.

According to a consent judgment also entered by the court on May 17, defendant Wayne A. Ludwig, one of the plan trustees, agreed to pay the plan $19,000 as restitution. Ludwig also was permanently barred from serving any plan covered by the Employee Retirement Income Security Act and is subject to a $3,800 fine, payable to the Labor Department, for his alleged breaches of the federal pension law.

In the default judgement, the court ordered Kokonaski to restore to the Foothills Litho Co. Inc. employee retirement plan $428,224.59 for the plan’s losses and permanently barred him from serving as a fiduciary to any benefit plan covered by ERISA. The court also ordered the plan to set off its losses against Kokonaski’s individual plan account balance if the losses are not otherwise restored to the plan.

Foothills Litho Co., partially owned by Kokonaski and Ludwig, filed for bankruptcy in 1994 and was liquidated in 1997. The company sponsored a money purchase pension plan covering 53 participants and had approximately $514,000 in assets as of 1993. At the department’s request, Kokonaski resigned his position with the plan in 1998 and an independent fiduciary, Laurel Trust Company, was appointed to administer the plan.

According to the department’s lawsuit, between 1990 and 1997, Kokonaski wrote over 180 checks to himself against the plan’s account totaling almost $200,000 and transferred an additional $81,000 from the plan to Foothills Litho Co. Kokonaski allegedly signed all of these checks in his capacity as trustee of the plan, with no loan notes, payment schedules or security given for these disbursements. The lawsuit notes that no money was ever returned to the plan.

Ludwig allegedly co-signed some of the unlawful checks written on the plan’s account and failed to make adequate provisions for the plan to be managed prudently when he retired from the company in 1992 and resigned from his duties as a plan trustee.

The investigation in this lawsuit was conducted by the department’s Philadelphia Regional Office of the Pension and Welfare Benefits Administration.

Herman v. Foothills Litho Company, Inc.
Civil Action # 98CV-1376

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

Contact Name: Sharon Morrissey
Phone Number: 202.219.8921