Labor Department Sues Florida Law Firm And Pension Trustee Over Plan Loans

Archived News Release — Caution: Information may be out of date.

The U. S. Department of Labor has sued a Miami attorney and his law firm for failing to properly manage and operate the firm’s pension plan in accordance with federal pension law.

Bandsawe Residual, formerly known as Bailey, Hunt, Jones & Busto, P.A., sponsors the profit sharing plan covering 34 participants. The plan was converted into a profit sharing plan from a money purchase pension plan during 1994 and had assets in the amount of $723,399 on Dec. 31, 1998.

The lawsuit names as defendants the law firm and plan trustee Guy B. Bailey, Jr. Bailey and his law firm allegedly violated the Employee Retirement Income Security Act by using pension plan assets to pay payroll taxes owed to the Internal Revenue Service by the firm. They indirectly accomplished the transactions by causing certain participants to take plan loans totalling $162,346 from their plan account and in turn loaned the funds to the law firm.

Bailey also failed to adhere to policies and procedures which he adopted for administration of a participant loan program. He authorized 18 loans from the plan totaling $121,803 over several years. Although the plan required that the money be repaid through payroll deduction, the firm did not institute repayment procedures and all the loans are currently in default.

The department's lawsuit seeks a court order to require that the defendants repay the plan for all losses with interest, correct any outstanding prohibited transactions, and offset any benefit claims which Bailey may have against the plan in order to recoup losses on behalf of participants. The lawsuit also asks the court to remove Bailey from any fiduciary capacity involving the plan, to permanently bar him from serving in a position of trust to any plan governed by ERISA, and to appoint a successor fiduciary to take over management and operation of the 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 Howard Marsh, director of the Atlanta Regional Office of the department’s Pension and Welfare Benefits Administration (PWBA). “Employers and workers can reach us at 404/562-2156 for help with any problems relating to private-sector pension and health plans.”

The lawsuit was filed on Oct. 17 in federal district court in Miami. This case resulted from an investigation conducted by the Miami District Office of PWBA into alleged violations of ERISA.

(Herman v. Bailey)

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