U.S. Labor Department Files Suit Against Warwick, Rhode Island, Company And Officers Alleging Misuse Of Employee Profit Sharing Plan Funds

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor has filed suit against Central Scale Company of Warwick, Rhode Island, as well as the President and Vice President of the company, alleging misuse of funds belonging to the company’s employee profit sharing plan.

According to James Benages, New England Regional Director of the Labor Department’s Pension & Welfare Benefits Administration (PWBA), his agency has filed suit in the U.S. District Court for the District of Rhode Island against the company, as well as Robert Geisser, President, and Matthew Geisser, Vice President, who are both Trustees of the Central Scale Profit Sharing Plan. He noted that the suit also names a relative of the trustees as a party in interest who the other defendants allowed to receive an illegal loan from the plan.

Benages noted that Central Scale Company is located at 2027 Elmwood Avenue, Warwick, Rhode Island, and is in the business of calibrating, repairing and distributing scales and material handling equipment. The profit sharing plan was established for the benefit of company employees on March 1, 1979.

He indicated that the Labor Department suit alleges that Robert Geisser and Matthew Geisser, who are brothers, misused their discretionary authority over the assets of the plan by causing the plan to make a loan to a relative in the amount of $80,000 without proper documentation, appraised collateral, or repayment terms; and failed to take appropriate steps to collect any interest or principal on the loan. The suit alleges the Geissers also caused the plan to continue to hold a similarly unsecured and uncollected loan to two friends of Matthew Geisser in the amount of $111,931.19; caused the plan to buy and sell highly speculative, high risk stocks, which were traded among the plan, the company and Matthew Geisser; and made unexplained withdrawals from plan accounts.

Benages stressed that the federal law which protects private employee benefit plans, including profit sharing plans, known as the Employee Retirement Income Security Act (ERISA), specifically requires plan officials to administer such plans solely in the interest of the participants and beneficiaries, for the exclusive purpose of providing benefits to those participants and their beneficiaries.

“In this case,” said Benages, “it would appear that the defendants thought of their employees’ profit sharing plan as their own private bank account to do with as they pleased. The blatant misuse of plan funds in this case it totally inexcusable, unacceptable and clearly in violation of federal law.”

Benages noted that the Department’s lawsuit asks the court to permanently enjoin the defendants from future violations of ERISA; permanently prohibit Robert Geisser and Matthew Geisser from ever again serving as fiduciaries to an ERISA covered plan; remove both individuals as trustees of the company plan; appoint an independent trustee to hold and invest the assets of the plan; require the defendants to undo all prohibited transactions; and require them to disgorge all profits gained as result of their illegal actions, as well as to pay back to the plan all losses which resulted from their fiduciary breaches. The suit also asks the court to require the trustees’ relative to undo the prohibited transactions in which she engaged and restore to the plan all principal and lost interest.

“What we are talking about here,” said Benages, “is a breach of trust. And those institutions and individuals holding positions of trust with respect to employee benefit plans of any kind must be aware of their responsibilities under the law. Plan funds must be used only for the benefit of participants and beneficiaries, not for the benefit of those administering the plan. Misuse of plan funds for any other purpose will not be tolerated.”

In November, 1999, the Trustees of the Plan entered into an agreement with the Department of Labor to voluntarily turn over the Plan assets to an independent investment manager in order to protect the interests of the participants.

The legal action against the defendants resulted from an investigation by the Pension and Welfare Benefits Administration. The agency’s New England regional office is located in the John F. Kennedy Federal Building in Boston. The phone number is 617-565-9600. The civil action file number for this case is 00525T.

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