Labor Department Sues Erickson Cosmetic Executives For Self Dealing Of Pension Plan Assets And Unpaid Medical Claims

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor sued Erickson Cosmetics Company, its former president and controller for self-dealing violations of the federal pension law, which resulted in losses to the pension plan and unpaid medical claims for benefit plan participants and beneficiaries.

The pension plan had 87 participants and assets of $773,097 as of Nov. 30, 2000.

The department alleged that the defendants, including then company president Wallace A. Erickson and controller William Bianucci withheld from employees’ pay their voluntary contributions to the plan but failed to remit the employee contributions to the 401 (k) plan from Sept. 22, 1998 through Oct. 21, 1998 and again from March 5, 1999 through March 19, 1999. The lawsuit further alleges that the defendants withheld loan repayments to the plan during the same time periods and retained both the withheld employee contributions and loan repayments in the company’s general assets.

Also, the lawsuit alleges that when William Bianucci resigned his sole trustee position with the 401(k) plan on May 13, 1999, no successor trustee was named by the company. The company ceased operations on or about April 1999 and was involuntarily dissolved by the State of Illinois this year. Since Bianucci’s resignation, participants and beneficiaries have been unable to obtain distributions from their individual account balances.

In regard to the benefit plan, the Labor Department alleges that from Jan. 1, 1999 through March 19, 1999, $20,978.66 were withheld from weekly payroll checks for benefit plan premiums and were not remitted to the insurance carrier, Blue Cross/Blue Shield. Later the insurance carrier terminated the contract it had with the company because of the nonpayment of premiums, leaving estimated unpaid medical claims of $68,251.22.

The lawsuit is seeking to have the court order Erickson and Bianucci to pay restitution to both the 401(k) and benefit plans for any of the losses, plus interest, incurred by their fiduciary breaches of the Employee Retirement Income Security Act (ERISA), as well as calling for Bianucci’s individual account balance to be offset if the losses cannot be restored otherwise by Erickson and Bianucci.

Further, the lawsuit seeks to have Erickson permanently barred from serving as a fiduciary or service provider to any ERISA-covered employee benefit plan and for Erickson Cosmetics to be removed from its fiduciary position and replaced by an independent fiduciary to administer the 401(k) plan until it is terminated and to distribute its assets.

“Our goal is to assure that consumers know the department is only a phone call away to help protect the benefits promised by employers,” said Kenneth Bazar, director of the Chicago Regional Office of the department’s Pension and Welfare Benefits Administration., which investigated the case. “Employers and workers can reach us at (312) 353-0900 for help with any problems relating to private-sector pension and health plans.”

The lawsuit was filed Dec. 27 in Northern District of Illinois, Eastern Division, Federal Court in the Cook County, Ill.

(Herman v. Erickson Cosmetics Company, et al)
Civil Action No. OOC 8103 (Judge Bucklo)

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