Fairfield, Connecticut, Company And Officers Charged In Federal Labor Department Lawsuit With Misuse Of Employee Pension Plan Funds

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor has filed suit against Wiretex Manufacturing Company, Inc., of Fairfield, Connecticut, and the company’s top two officers alleging misuse of the assets of the company’s employee pension plan.

According to James M. Benages, New England Regional Director of the U.S. Labor Department’s Pension & Welfare Benefits Administration (PWBA), the Department’s suit alleges that the company, as well as company president Robert Garofalo and company vice president Emil Garofalo, misused a total of $642,850 in assets belonging to the Wiretex Manufacturing Company, Inc. Pension Trust Plan. The pension plan was established in 1964 to provide retirement and death benefits for employees of the company.

Such an employee benefit plan, Benages noted, is subject to the requirements of the Employee Retirement Income Security Act (ERISA), which makes it the responsibility of those administering the plan to make sure that plan assets are invested wisely and used solely for the benefit of the plan’s participants and beneficiaries.

According to Benages, Wiretex operates a metal fabrication business. The company’s pension plan has ten active participants, including the two individual defendants, who are both trustees of the plan. Because of the actions of the defendants, as of August 30, 1999, the only assets remaining in the plan amounted to approximately $3,645.

“Our suit alleges,” said Benages, “that, during the period August 1, 1991 through the present, the company has acted as the sponsor and administrator of the pension plan, while both Robert and Emil Garofalo have served as trustees to the plan. This means that all three defendants are fiduciaries and parties in interest with respect to the plan. We charge in our suit that Robert and Emil Garofalo caused the pension plan to loan to Wiretex at least $484,800 in plan assets, which loan has never been repaid. We further allege that both defendants caused the plan to distribute at least $158,050 in plan assets to Robert Garofalo, in violation of the plan’s own rules.”

Benages stressed that both alleged actions are violations of the provisions of ERISA which prohibit pension plan fiduciaries from using plan assets for their own benefit. In addition, he noted that the defendants are charged with failing to provide plan participants with summary Plan descriptions and annual reports, as well as other information required by law.

“Such breaches of trust cannot go unchallenged,” said Benages, who noted that the Department’s suit was filed with the U.S. District Court for the District of Connecticut on March 13, 2000. The suit asks the court to permanently enjoin Robert and Emil Garofalo from ever again serving as fiduciaries to any ERISA-covered plan; permanently enjoin Wiretex from acting as a plan administrator; require the defendants to restore any and all losses they caused to the plan, with interest; and require the defendants to undo the prohibited transactions in which they engaged, and return all profits, with interest, to the plan.

Said Benages, “Those institutions and individuals holding positions of trust with respect to employee benefit plans of any kind must be aware of their responsibilities under the law. Plan funds must be used only for the benefit of participants and beneficiaries, not for the benefit of those administering the plan. Misuse of plan funds for any other purpose will not be tolerated.”

The legal action against the defendants resulted from an investigation by the Pension and Welfare Benefits Administration. The agency’s New England regional office is located in the John F. Kennedy Federal Building in Boston. The phone number is 617-565-9600. The civil action file number for this case is 300cv463(JBA).

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