Former Kansas Trustee Ordered to Make $120,000 in Restitution

Archived News Release — Caution: Information may be out of date.

The former trustee of two 401(k) plans sponsored by Fernando M. Egea, M.D., of Kansas City, Kansas, has been ordered to repay $120,710.97 to the plans and its participants under a judgment obtained February 9, 2001 by the U.S. Department of Labor.

Fernando M. Egea also is permanently barred from exercising control over any plan governed by the Employee Retirement Income Security Act (ERISA) and must waive his right to any distributions made by the plans.

A lawsuit filed simultaneously with the judgment alleged that Egea violated his duties as trustee to the plans when he:

• Made five loans totaling $238,157.29 from the profit sharing plan in violation of the plan’s rules, liquidated the assets to the detrimentof the participants, and failed to repay any of the loans
• Withdrew $67,609 from the plans for his own personal use over the period July 1989 to March 1992 without executing any loan documents and failed to provide collateral for the loans
• Made a participant loan in an amount in excess of that allowed by the plan, did not record the participant’s collateral for the loan and failed to deposit loan repayments into the plans’ bank accounts; failed to maintain a current plan document, to update participants’ account balance and to furnish participants’ documents required by law, including the summary annual report and summary plan description
• Failed to obtain a fidelity bond
• Filed false and inaccurate Form 5500 annual reports for the plans
• Failed to value plan assets, including bars of silver, at fair market value.

The judgment was entered and the lawsuit was filed on February 9, 2001, in the federal district court in Kansas City, Kansas.

This case resulted from an investigation conducted by the Kansas City Regional Office of the department’s Pension and Welfare Benefits Administration into alleged violations of ERISA.
In a separate action, the U.S. Bankruptcy Court for the District of Kansas ruled that the $120,710.97 debt Egea owes to the plans is non-dischargeable.

(Herman v. Egea
Civil Action No. 01-2054 KHB)

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Archived News Release — Caution: Information may be out of date.