Labor Department Sues Missouri Trustee and Corporate Officers Over Misuse Of 401(K) Assets

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor sued the former 401(k) trustee and corporate officers of three Fenton, Missouri corporations for allegedly failing to timely deposit $32,149.06 of employee contributions into the Mid-Continent Holding Company 401(k) Plan.

Mid-Continent Holding Company is the parent holding company for America’s Home Remodelers (AHR) and A.I. Manufacturing Company, LLC (AI). The plan covered employees of AHR and AI. Under the plan, which is a deferred compensation plan, employees could elect to defer a portion of their wages as contributions to the plan. As of the date that the companies were forced into receivership and liquidated, the plan had assets of $524,807 and 208 participants nationwide.

According to the lawsuit, trustee James F. Kistner and Kevin M. Vaughn violated the Employee Retirement Income Security Act (ERISA). Kistner and Vaughn were officers of the two corporations whose employees were covered by the plan.

The lawsuit alleges that the defendants failed to transfer to the plan contributions withheld from the paychecks of employees of AHR/AI from May to August 1998 and to take action to protect the plan’s assets from losses. They also allegedly failed to hold the plan's assets in trust and used plan assets for the benefit of themselves and the employer.

Both Kistner and Vaughn are separately charged with failure to take action to remedy the fiduciary breaches with the plan.

The lawsuit seeks a court order to appoint an independent trustee to manage the plan. The department also asks the court to require that the defendants restore to the plan all losses with interest, undo any prohibited transactions with the plan, offset their plan benefit accounts for the amount of losses and to redistribute the offset to the accounts of all plan participants except the defendants. In addition, the lawsuit asks that the defendants be permanently barred from serving in a position of trust to any plan governed by ERISA in the future.

“Our goal is to assure that consumers know that the department is only a phone call away to help protect the benefits promised by employers," said Gregory Egan, director of the Kansas City Regional Office of the Labor Department’s Pension and Welfare Benefits Administration (PWBA). “Employers and workers can reach us at 816.426.5131 for help with any problems relating to private-sector pension and health plans.”

The lawsuit, filed on March 23, 2001 in federal district court in St. Louis, Missouri, resulted from an investigation conducted by the St. Louis District Office of PWBA alleging violations of ERISA.

(Chao v. Kistner
Civil Action No. 4:01CV429RWS)

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