Morsches Lumber Agrees To Settle Labor Department Lawsuit Over Pension Plan Violations

Archived News Release — Caution: Information may be out of date.

In a consent order/judgment obtained March 22 by the U.S. Department of Labor, involving the pension plan of Morsches Lumber, Inc. of Columbia City, Indiana, plan officials agreed to divest the plan of certain stock holdings and loans prohibited by federal employee benefit law.

Within 30 days of this order, the company’s retirement plan and individual defendants Paul J. Morsches, Jr. and Franz Morsches will divest the plan of its holdings of stock of Morsches Lumber, Inc., and subsidiaries Builder’s Mart of Goshen, Inc.(BMG) and Builder’s Mart of Wabash, Inc. (BMW), which will redeem their stock from the plan at no less than fair market value.

The defendants also will divest the plan of certain loans by selling them to another subsidiary of the parent lumber company for no less than the full amount of the principal balance owed or accrued interest due on the loans at the time of the sale. Amounts for both kinds of divestitures will be determined by the independent appraisal firm.

After these actions are accomplished, Paul and Franz Morsches, who served as plan trustees, will resign their positions and be barred permanently from serving in any fiduciary capacity to this plan or to any other plan covered by the Employee Retirement Income Security Act of 1974 (ERISA). Pursuant to the court order, Morsches Lumber, Inc. will appoint LaSalle Bank of Chicago as the independent trustee of the plan and Robert W. Baird & Company of Milwaukee as the independent investment advisor to the plan.

The pension plan reported 110 active participants and $4.3 million in assets as of December 31, 1999.

In its complaint filed simultaneously, the Labor Department alleged that since at least August 1, 1994, the defendants knew or should have known they were violating ERISA because the stocks issued by BMG and by BMW were not qualifying employer securities within the meaning of Section 407. In addition, the department’s lawsuit said that beginning on November 15, 1994, and at various times since, Paul and Franz Morsches permitted plan assets to be invested in loans to construction companies and individuals without adequate and appropriate investigation about the credit and financial condition of the borrowers, without developing repayment schedules and, in some cases, without obtaining adequate collateral for the loans.

Allegedly, they also loaned plan assets to construction companies and individuals who used portions of the plan assets to purchase goods from the plan sponsor and other parties in interest to the plan.

In obtaining today’s order, Kenneth Bazar, regional director of the Chicago Regional Office of the Labor Department’s Pension and Welfare Benefits Administration, which conducted the investigation, said, “We want the public to know that the agency is vigilant in protecting the rights of participants and beneficiaries of private sector employer-provided pension and welfare plans.” He added that concerned participants can call his office in Chicago for similar assistance. The telephone number is 312.353.0900.

The consent order/judgment was entered in the federal district court in Ft. Wayne on March 22. The complaint was filed March 22 in the same court.

(Chao v. Paul J. Morsches, Jr., et al
Civil Action No. 1:01CV0122)

U.S. Department of Labor news releases are accessible on the Internet. The information in this news release will be made available in alternate format upon request (large print, Braille, audio tape or disc) from the Central Office for Assistive Services and Technology. Please specify which news release when placing your request. Call 202.693.7773 or TTY 202.693.7775.

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