Labor Department Files Suit Against Delaware Corporation And Its CFO For Pension Violations

Archived News Release — Caution: Information may be out of date.

Los Angeles, California - The U.S. Department of Labor has filed suit against Avcon, Inc. (Avcon), a California-based Delaware corporation, and Avcon’s former chief financial officer, John N. Cowles, for violations of the Employee Retirement Income Security Act. The Avcon, Inc. 401(k) Plan, an employee benefit plan, was named as a defendant in the suit, which was filed February 22, 2001, in U.S. District Court for the Central District of California.

The alleged violations of ERISA occurred when Avcon and Cowles failed to forward contributions withheld from employee paychecks to the plan from November 27, 1997, to May 22, 1998, according to Billy Beaver, Los Angeles regional director for the Labor Department’s Pension and Welfare Benefits Administration. Avcon and Cowles are also alleged to have delayed the forwarding of employee contributions to the plan from March 6, 1996, to May 22, 1998.

The department’s complaint contends that Cowles, as CFO of Avcon, handled the forwarding of employee contributions to the plan, including withholding contributions from employee paychecks and deciding when, and if, to forward those contributions to the plan. Cowles is identified in the complaint as the person who exercised all of the discretionary authority for the administration of the plan on behalf of Avcon.

The suit asks the court to require Avcon and Cowles to make full restitution of all losses suffered by the plan and to require the plan to set off Cowles’ individual plan account against the losses caused by the alleged misconduct. It also seeks to remove Avcon as plan administrator and named fiduciary; to remove Cowles as plan trustee and named fiduciary; to appoint an independent fiduciary to make distributions to the plan’s participants; to require Cowles and Avcon to pay for all costs associated with the appointment and retention of the independent fiduciary; and to bar Cowles permanently from serving as a fiduciary of or service provider to any employee benefit plan subject to ERISA.

Today’s court action was a result of an investigation conducted by the Los Angeles Regional Office of PWBA, headed by Beaver, and is part of an ongoing initiative to ensure compliance with ERISA fiduciary standards with respect to timely deposit of employees’ contributions to 401(k) plans.

Beaver said, “This case exemplifies our commitment to protect the hard-earned benefits of workers. Workers can help us protect their plan benefits by contacting our office at 626.583. 7862 if they have questions or suspect abuse of their pension, health or other benefit plans.”

(Chao v. Avcon & Co., Inc. et al
Civil Action No. 01-CV-1737)

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