Manchester, New Hampshire, Employers Return Nearly $500,000 To Employee Benefit Plan According To U.S. Labor Department Law Suit

Archived News Release — Caution: Information may be out of date.

Two companies based in Manchester, New Hampshire, and four family members who jointly own them have repaid nearly $500,000 to an employee profit sharing plan following a U.S. Department of Labor investigation.

A lawsuit was filed by the department on March 15, 2001, against Sylvester Sheet Metal, Inc. and Sylvester Realty Company, both headquartered at 451 Pepsi Drive, Manchester, New Hampshire. Also named as defendants, as joint owners of both companies, were Henry W. Sylvester, Sr., Michael R. Sylvester, Glenn M. Sylvester and John J. Sylvester.

The suit alleged violations of the federal Employee Retirement Income Security Act (ERISA), which protects employee pension and welfare benefit plans. ERISA is administered by the Labor Department’s Pension and Welfare Benefits Administration (PWBA).

The lawsuit noted that between March 1996 and the present time, Sylvester Sheet Metal, Inc., was the plan sponsor and plan administrator of the Sylvester Sheet Metal Retirement Plan, a 401(k) profit sharing plan set up for the benefit of the approximately 28 employees of the company. The four owners were identified as trustees and fiduciaries of the plan with the authority to exercise control over the disposition of the plan’s assets. Both companies named as defendants and the four owners were also identified as parties in interest (related parties), with respect to the plan.

ERISA requires that employee benefit plan assets be used and invested solely for the benefit of the plan’s participants, and specifically prohibits the use of plan assets for the benefit of any party in interest, according to James Benages, Boston Regional Director for PWBA.

The suit alleged that, over a two year period, the Sylvesters had caused the plan to make unsecured loans and mortgage loans to Sylvester Sheet Metal, Inc. and Sylvester Realty Company totaling $871,182.06. In all, five loans were made to the companies by the plan in violation of ERISA. Over the period of years covered by the suit, the loan balances represented from over 70% of total plan assets to around 40% of the plan’s assets.

As a result of PWBA’s investigation and the department’s impending lawsuit, on November 24, 2000, the defendants repaid to the plan the total outstanding loan balance of $471,074.86, Benages noted.

To ensure the defendants comply with the law in the future, Labor Department attorneys recently filed the suit and a consent judgment agreed to by the defendants with the U.S. District Court for the District of New Hampshire. On March 20, 2001, the consent judgment and order was signed by U.S. District Judge Steven J. McAuliffe. The order prohibits the defendants, who neither admit nor deny the allegations, from future violations of ERISA and enjoins them for ten years from serving as fiduciaries to any ERISA-covered plan.

The order allows John J. Sylvester to continue as a fiduciary of the Sylvester Sheet Metal, Inc. Health Plan so long as it is an employee welfare benefit plan administered by an independent third party.

The Labor Department’s legal action against the defendants followed an investigation by the Boston Regional Office of the Pension and Welfare Benefits Administration. That office is located in Room 575 of the John F. Kennedy Federal Building in Boston. The telephone number is 617.565.9600.

(Chao v Sylvester Sheet Metal, Inc., et al
Civil Action No. 01-CV-92)

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