Labor Department Settles Its Lawsuit With Michigan Profit Sharing Plan Officials

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor has settled its lawsuit against a Warren, Mich. profit sharing plan and its officials, who allegedly failed to forward employee contributions through payroll withholding to the plan and retained the money in the general assets of the plan sponsor and its subsidiaries.

Alan J. Ferrara of law firm of Finkel, Whitefield, Selik, Raymond, Ferrara & Feldman, P.C., was appointed by the court as an independent fiduciary to marshall the remaining assets of the North American Financial Services Company (NAF-Tech) Employees’ Profit Sharing Plan and to distribute them to eligible participants, effectively liquidating the plan. Defendants Daniel Thomas, William Bates and Eric Smith were ordered to pay specific amounts to the independent fiduciary to be held for the benefit of plan participants. According to Ferrara, plan trustees Thomas and Bates already have deposited their required amounts with him.

The final individual plan defendant, Stephen Macdonald, was barred from serving as a fiduciary to any employee benefit plan subject to the Employee Retirement Income Security Act (ERISA), for a period of two years. Macdonald was the chief financial officer of NAF-Tech and Smith was the company’s chief executive officer.

The plan was established to provide employees of NAF-Tech and its three wholly-owned subsidiaries (North American Financial Group, North American Insurance Services, Inc. and North American Capital Advisors, Inc.) with benefits upon retirement, disability or death.

From Dec. 2, 1996 through Aug. 8, 1997, the plan allegedly suffered losses of $22,636.54, including lost earnings. The plan had 42 participants and assets of $364,701 on Dec. 31, 1997, as reported in the Annual Report Form 5500 filed with the department by the plan. Twenty-nine participants will be affected by the settlement.

Joseph Menez, regional director of Pension and Welfare Benefit Administration’s Cincinnati office, said, “In addition to ensuring that plan participants’ contributions are returned in this case, we wanted to emphasize that our goal is to let consumers know that the department is only a phone call away to help protect the benefits promised by employers. Our telephone number is 859-578-4680. And we can’t express too often that we are here to help with any problems relating to private-sector pension and health plans.”

The consent order and judgment, entered in the federal district court in Detroit, Mich., on June 20, resulted from an investigation conducted by the Cincinnati Regional Office of PWBA into alleged violations of ERISA. The department’s lawsuit and consent order/judgment were filed simultaneously on June 5.

(Herman v. Daniel Thomas, et al.)
Civil Action No. 00-60169 (George Caram Steeh)

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.