Labor Department Sues Former Executives Of Employee Leasing Firm For Misusing Plan Assets

Archived News Release — Caution: Information may be out of date.

The U. S. Department of Labor yesterday sued the former operators of bankrupt U. S. Staffing, Inc., a Houston, Texas, employee leasing firm, for failure to transmit employee contributions for pension and health benefits to the trust account of plan clients and misusing plan assets to benefit others.

U. S. Staffing, Inc. provided payroll administration and health insurance benefits for employees of small business clients. U.S. Staffing established a trust to provide these benefits, and the trust constitutes an employee benefit plan governed by pension law -- the Employee Retirement Income Security Act (ERISA).

The lawsuit alleges that W. Sherman Adcock, James D. Smith and Cruz C. Alderete violated ERISA by improperly handling plan assets. At the time of the improper actions, Adcock and Smith were officers and directors of U. S. Staffing, Inc. and Alderete was the administrator and trustee of the trust.

Adcock and Smith allegedly failed to transmit to the plans' trust account with Paine Webber contributions withheld from employee paychecks over the period September 1994 to March 1995. The defendants also were alleged to have transferred and used $10,155 in plan assets as collateral and payment for a loan to benefit a party in interest. In addition, defendants Adcock and Smith used $3,000 of plan assets to pay legal expenses for a transaction in which the plan received no consideration.

As relief, the lawsuit seeks a court order to require that the defendants restore all losses with interest to the plan, undo any transactions prohibited by federal pension law and be permanently barred from serving in positions of trust to any other plan governed by ERISA.

"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 Bruce Ruud, director of the Dallas Regional Office of the department's Pension and Welfare Benefits Administration. "Employers and workers can reach us at (214) 767-6831 for help with any problems relating to private-sector pension and health plans."

The lawsuit was filed on October 16, 2000 in federal district court in Houston. The case resulted from an investigation conducted by the Dallas Regional Office of the Labor Department's Pension and Welfare Benefits Administration into alleged violations of ERISA.

(Herman v. Adcock)

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