Minnesota Automobile Dealership And Executives Sued Over $240,500 In Improper Profit Sharing Plan Loans

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor sued defunct Johnson Motor Company, Inc. of Glencoe, Minnesota, and two corporate executives on March 23, 2001 for failing to repay $240,500 in loans from the company’s profit sharing plans to themselves.

Named as defendants are the company, President Richard D. Johnson and Vice President Robert L. Johnson. Robert Johnson also was a trustee of the profit sharing plan.

According to the lawsuit, the profit sharing plan made a series of unsecured loans totaling $205,000 to Johnson Motor Company from June 1986 to October 1987. The plan made the loans without executing loan agreements and failed to report the loans on the Form 5500 annual reports required to be filed with the Labor Department. The plan made additional loans to the Johnsons totaling $35,500 without obtaining an exemption for the loans and without reporting them on the Form 5500 annual reports. The loans have never been repaid.

The Employee Retirement Income Security Act (ERISA) generally prohibits loans between employee benefit plans and persons who manage and operate the plans unless covered by a statutory or administrative exemption.

Johnson Motor Company ceased operation on August 31, 2000 and surrendered its assets to Chrysler Financial.

On December 5, 2000, five plan participants sued the defendants and the Johnson family partnership, JB McLeod, in state court to require distribution of the participants’ account balances. The court ordered plan trustee Robert Johnson to pay $107,400 from the plan’s account to the plan participants.

The Labor Department’s lawsuit seeks a court order to require the defendants to reimburse the plan for all losses with interest, to require the Johnsons to offset their individual account balances to repay plan losses, and to redistribute the offset amount to the plan accounts of the remaining participants. The lawsuit also seeks to remove the defendants from their positions with the plan, to permanently bar them from serving as fiduciaries to any plan governed by ERISA and to appoint an independent fiduciary to manage the plan.

The lawsuit, filed in federal district court in Minneapolis, Minnesota, resulted from an investigation conducted by the Kansas City Regional Office of the Pension and Welfare Benefits Administration (PWBA) into alleged violations of ERISA. According to PWBA’s Kansas City Regional Director Gregory Egan.  “This case exemplifies our commitment to protect workers’ hard-earned benefits. Workers can help us protect their benefits by contacting our office at 816.426.5131 if they have questions or suspect abuse of their pension, health or other benefit plans.”

(Chao v. Johnson Motor Company, Inc.
Civil Action No. 01-514JRT/FLN)

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