Houston Company And Pension Trustee Sued For Misusing Over $238,000 In Plan Assets

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor obtained a consent judgment and order on April 4, 2001 requiring fiduciaries of the profit sharing plan of Distribution Specialists, Inc. of Houston, Texas, to pay $101,618.38 in restitution and civil penalties for making improper loans and transfers from the pension plan to benefit themselves.
Distribution Specialists Inc. is a trucking distribution company located in Houston. The profit sharing plan covered as many as 37 participants and had assets of $919,583 as of December 31, 1997.

Under the judgment, the profit sharing accounts of the defendants will be offset by the amount of the restitution and re-distributed to the accounts of the remaining plan participants. The judgment also allows Michael O’Connor to remain as the plan trustee in order to terminate the plan and distribute its assets. O’Connor must provide proof that the plan’s assets have been distributed to eligible participants. In the event O’Connor has not distributed all of the plan’s assets by December 31, 2001, the Labor Department may recommend a successor trustee to replace him.

In a lawsuit filed on July 14, 2000, the department alleged that the company and Michael J. O’Connor violated the Employee Retirement Income Security Act (ERISA) when they made a series of transfers and a loan totaling in excess of $238,000 over the period 1994 to 1998. The department alleged that the unsecured loan has never been fully repaid and that the series of plan transfers benefited Distribution Specialists and Michael O’Connor. The department filed an amended complaint simultaneously with the judgment to add Constance O’Connor and John Townley, Jr. as defendants because both received income as a result of the prohibited transactions committed by Michael O’Connor. O’Connor is the mother of Michael O’Connor and Townley is the vice president of the company.

“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 Bruce Ruud, director of the Dallas.

Regional Office of the Labor Department’s Pension and Welfare Benefits Administration (PWBA). “Employers and workers can reach us at 214.767.6831 for help with any problems relating to private-sector pension and health plans.”

The judgment, filed in federal district court in Houston, resulted from an investigation conducted by the Dallas Regional Office of PWBA into alleged violations of ERISA.

(Chao v. Distribution Specialists, Inc.
Civil Action No. H-00-2410)

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