Community Care Systems, Inc., Of Wellesley, Mass., & Owner Agree To The Restoration Of Nearly $140,000 In Employee Pension Funds

Archived News Release — Caution: Information may be out of date.

Community Care Systems, Inc. (CCSI), of Wellesley, Massachusetts, and Frederick Thacher, the company’s chief executive officer and principal shareholder, have agreed to the restoration of nearly $140,000 to the pension plan accounts of the participants of the Community Care Systems, Inc. Employee 401(k) Plan as the result of a lawsuit filed by the U.S. Department of Labor.

According to James Benages, New England regional director for the Department’s Pension & Welfare Benefits Administration (PWBA), in June 1998 his agency filed suit against the defendants, who operated a number of behavioral health care facilities in Massachusetts and Maine, alleging that, since November 1997, Thacher and CCSI had caused some of these subsidiaries to withhold employee 401(k) Plan contributions from their paychecks without forwarding the money to the Plan.

Benages stressed that such actions are in violation of the federal law known as the Employee Retirement Income Security Act (ERISA), which protects the assets of private sector pension and employee benefit plans and which requires individuals and companies with authority over and responsibility for plan assets to administer those assets solely for the benefit of the employee participants and their beneficiaries.

In a consent judgment and order, agreed to by the parties and signed by U.S. District Judge Edward F. Harrington on April 5, 1999, and modified on May 24, 1999, Thacher and CCSI agree to the restoration of $138,036.43 to employees participating in the 401(k) Plan who had worked for CCSI, Charles River Health Management (CRHM), Charles River Hospital East (CRHE) of Wellesley, Charles River Hospital West (CRHW) of Chicopee, and Jackson Brook Institute (JBI), of South Portland, Maine. Some of these entities have since changed ownership, gone into bankruptcy or ceased to exist.

According to the modified judgment, $74,748.81 of the restored amount announced today has been paid to the fund from the bankruptcy estate of JBI. The balance of $63,287.62 will be paid to the plan from an escrow account held by the court. On June 29, 1998, the Department had obtained a preliminary injunction signed by Judge Harrington requiring the defendants to transfer $200,000 to an interest-bearing escrow account and appoint an independent plan administrator to determine the exact amounts – plus interest – which had been deducted from plan participants’ paychecks but had not been forwarded to their Plan accounts. The payback amount announced today is the result of the plan administrator’s calculations. (The balance of the escrow account will be retained by the court pending the resolution of another lawsuit involving CCSI.)

The court order also directs the defendants to appoint an independent plan administrator and an independent trustee to the Plan at their expense, and prohibits Thacher and CCSI from ever serving as trustee, plan administrator or service provider to this or any other employee benefit plan. The judgment also prohibits the defendants from future violations of ERISA.

“This judgment affirms,” said Benages, “that even when an employer who sponsors an employee benefit plan is having financial difficulties – as have the defendants in this case – funds deducted from employees’ paychecks for pension or other types of employee benefit plans must not be used by the employer for other purposes. The law requires such funds to be transferred to plan accounts without delay.”

Benages noted that the legal action resulted from an investigation by PWBA, headquartered in Boston, into alleged violations of ERISA.

(Herman v Frederick Thacher and Community Care Systems, Inc.)
Civil Action Number: 98-CV-11202-EFH

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

Contact Name: John M. Chavez
Phone Number: 617.565.2075