New Jersey Plan Administrator/ Trustees Sued By Labor Department For Self Dealing Violations; Ineffective Oversight

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor filed a lawsuit on Aug. 14 against the administrator of four multiemployer plans in Jersey City, N.J., for using the plans' assets for his own benefit and other violations of federal pension law. The lawsuit also alleges the plans' seven trustees failed to properly monitor the actions of the administrator.

Named in the lawsuit are Carmelo J. Sita, administrator of the four plans that provided retirement, health and vacation benefits to employees of the Hudson County District Council; and trustees Stephen Crevani, Salvatore DiBlassi, Frank DiTomasso, Ralph La Rocca, Salvatore Reo, Cosmo Sancio and Nick Sita; and Local Union 325 of the Laborers International Union of North America.

The District Council represents employees of employers in the construction industry and is affiliated with Local 325 of the Laborers International Union, AFL-CIO. Sita was retained as administrator to the Council’s pension, annuity, welfare and vacation funds in 1978.

The lawsuit alleged from 1994 until his resignation as the funds’ administrator in 1999, Sita engaged in various actions that violated the Employee Retirement Income Security Act (ERISA) that included:

• using plan funds to partially pay salaries of business agents to the Council and Local 325, while failing to determine the value of the services provided to the plan;
• using the pension and annuity funds to pay a disproportionate amount of common expenses, such as office rent and supplies;
• paying many of the Council’s expenses from the pension fund;
• overstating the hours he worked on the pension and annuity funds to enhance his entitlements;
• failing to allocate fund expenses to the individual accounts of participants, resulting in some retirees receiving inflated payments; and
• failing to declare two loans made to him by the annuity plan in default, and to reimburse the plan.

The lawsuit also alleged that during the period 1994-1999 the plan trustees failed to undertake reasonable efforts to oversee the expenditures of the funds’ money being administered by Sita; failed to ensure that Sita complied with the guidelines for expenditures adopted by all the funds; and failed to oversee the administration of the annuity fund’s loan program.

The lawsuit seeks to require that Sita and the trustees restore to the plan all losses, plus interest; correct any prohibited transactions with the plans; have their account balances offset for the amounts owed to the respective funds; and be permanently barred from serving as fiduciaries and service providers to any ERISA-covered plan.

“Our goal is to assure that consumers know that the department is only a phone call away to help protect the benefits promised by employers,” said Jonathan Kay, acting regional director of the New York Regional Office of the Labor Department’s Pension and Welfare Benefits Administration. “Employers and workers can reach us at (212) 637-0620 for help with any problems relating to private-sector pension and health plans.”

The action resulted from an investigation by the New York Regional Office of the Pension and Welfare Benefits Administration into violations of ERISA. The lawsuit was filed in the federal district court in Newark, N.J.

Herman v. Sita et al.

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