Labor Dept. Reaches Settlement With Michael Howe For Pension Violations

Archived News Release — Caution: Information may be out of date.

Los Angeles - The U.S. Department of Labor announced today a settlement agreement and consent decree was entered March 2, 2000, by the U.S. District Court for the Central District of California, resolving a suit against Michael Howe, president and sole shareholder of Bakery Industrial Services, Inc. (BIS), a Pasadena corporation, and the Bakery Industrial Services, Inc., 401(k) Profit Sharing Plan for fiduciary duty violations under the Employee Retirement Income Security Act (ERISA).

According to Billy Beaver, Los Angeles regional director for the Pension and Welfare Benefits Administration here, defendant Howe admitted liability for violations of ERISA which resulted in losses totaling $12,947 plus interest to the employee benefit plan.

The Department’s lawsuit, filed June 28, 1999, sought full restitution from Howe and BIS of all losses suffered by the plan due to their alleged fiduciary breaches, including lost interest and lost opportunity costs, Beaver said.

Under the terms of the plan, employees were permitted to make contributions to the plan by designating amounts to be withheld from their paychecks. From August 5, 1996, through June 15, 1997, BIS withheld $12,447 from employees’ paychecks. However, these contributions were not forwarded to the plan but were instead commingled with the general assets of BIS.

Also, under the terms of the plan, participants were permitted to borrow money from their accounts and to later repay such loans by directing BIS to withhold money from their paychecks. BIS withheld $500 designated for repayment of a loan from one employee’s paychecks but did not forward any of the money to the plan, the Department had alleged.

As a result of the settlement, Howe agreed to pay to the plan $13,535 to correct all prohibited transactions identified in the Department’s complaint and restoring all losses attributable to the fiduciary breaches, including lost interest and lost opportunity costs.

Further, Howe agreed to resign from his position as plan fiduciary in favor of an independent fiduciary who will have full discretionary authority to administer the Plan. Howe also agreed to a permanent injunction against serving as a fiduciary of or service provider to any plan covered by ERISA.

On December 22, 1999, the Court entered a default judgment against defendant BIS in the amount of $16,296.59. Defendant BIS filed for bankruptcy protection and is being liquidated under Chapter 7.

This settlement agreement and consent decree resulted from an investigation conducted by the Los Angeles Regional Office of PWBA, headed by Beaver. It is part of an ongoing initiative to insure compliance with ERISA fiduciary standards with respect to proper deposit of employee contributions to 401(k) retirement plans.

Note to editors: Civil Action File Number 99-06643 GAF (Jwjx)
(Alexis M. Herman, Secretary of the Labor, vs. Bakery Industrial Services, Inc., et al)

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