Labor Department Sues Maryland Trustee To Disallow Plan Debt From Bankruptcy Proceeding

Archived News Release — Caution: Information may be out of date.

The U. S. Department of Labor filed a lawsuit against Elizabeth Bateman, a former trustee of a 401(k) profit sharing plan and trust, to prevent her from having debt she owes the plan being discharged in a bankruptcy proceeding.

Bateman served as trustee of a 401(k) plan that was established in 1990 by GNM & Associates, Inc., an engineering firm in Silver Spring, Md. The plan allowed employees to defer a portion of their compensation and have it deposited in the plan on their behalf.

The lawsuit alleged that from Jan.1, 1997, to June 24, 1999, GNM did not have sufficient money in its operating account to pay all its expenses. It also alleged during this period Bateman continued to withhold employees’ compensation, but failed to transmit approximately $62,607 of employee contributions to the plan.

In October 1999, Bateman had filed for personal bankruptcy, but did not list the plan, its participants, or the Labor Department as creditors in her bankruptcy petition, nor did she give them notice of the deadline for filing adversary actions concerning non-dischargeability of debts.

The lawsuit alleged that Bateman’s failure to timely transmit employees’ contributions in the plan and her decision to keep those funds part of the company’s operating expenses violated provisions of the Employee Retirement Income Security Act (ERISA) that prohibits plan fiduciaries from failing to act solely in the interest of plan participants and from using plan assets in their own behalf. It also alleged Bateman’s violations of ERISA constituted fraud and/or embezzlement as defined under the Bankruptcy Code. The lawsuit seeks to have the court establish that the debt owed to the plan is non-dischargeable. In a related action, Herman v. GNM, the department filed a lawsuit against the Silver Spring firm to recover 401(k) assets from its estate, following a bankruptcy proceeding.

The actions resulted from an investigation by the Washington District Office of the Pension and Welfare Benefits Administration into violations of ERISA.

The Bateman lawsuit was filed on June 26 in the United States Bankruptcy Court in Greenbelt, Md.

Herman v. Bateman
Case No. 99-2-1790PM

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Archived News Release — Caution: Information may be out of date.