Labor Department Settles Lawsuit With Nashville Employer Over Failure To Put Employee Contributions Into 401(K) Plan

Archived News Release — Caution: Information may be out of date.

The U.S. Labor Department settled its lawsuit against a bankrupt Nashville, Tenn.-based firm, its affiliate and 401(k) plan official, resulting in the recovery to the plan of $156, 919 in unpaid employee contributions and approximately $100,000 in lost earnings.

The defendants are Exterior Systems Unlimited, Inc.(ESU), its wholly-owned subsidiary P&E Electric Co., Inc. (P&E), and Michael F. Perkerson, the latter agreeing to permit $20,000 of his individual plan account to be offset for part of the losses and reallocated to remaining participants in the plan. $100,000 has already been repaid to the plan by the defendants’ fiduciary liability insurance company, Federal Insurance Company.

In addition, the plan is set to recoup $69,000 from its priority claim against defendants ESU and P&E in U.S. Bankruptcy Court in Nashville, as well as a percentage of $136,900 from two other unsecured claims, also filed in bankruptcy court. With the total recovery for the plan’s participants anticipated at some $260,000, the Labor Department released all claims in its complaint with prejudice.

As a part of the settlement, Perkerson was permanently barred from serving in any fiduciary capacity to or having control over the assets of any employee benefit plans governed by the Employee Retirement Income Security Act. He was chief executive officer and chairman of the board of both companies as well as the plan’s trustee and an officer of another wholly-owned subsidiary, whose employees also participated in the plan.

According to the lawsuit, there were 169 participants in the plan and assets totaling $1,507,571 as of June 30, 1998. The suit alleged that employee contributions withheld from P&E and ESU payrolls from October 1996 to July 1997 were not forwarded to the plan, but were used to finance corporate operations of ESU and the subsidiaries.

The settlement is the result of an investigation conducted by the Atlanta Regional Office of the department’s Pension and Welfare Benefits Administration into alleged violations of federal pension law. It was entered March 22 in federal district court in Nashville.

(Herman v. Exterior Systems Unlimited, et al)
Civil Action # 3:99-785

U.S. Department of Labor news releases are accessible on the Internet. The information in this news release will be made available in alternate format upon request (large print, Braille, audio tape or disc) from the Central Office for Assistive Services and Technology. Please specify which news release when placing your request. Call 202.693.7773 or TTY 202.693.7775.

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