Labor Department Sues North Carolina Corporation And Trustees For Misusing Pension And Health Assets

Archived News Release — Caution: Information may be out of date.

Atlanta, Georgia - The U.S. Department of Labor sued Dylan Mortgage Brokers, Inc. of Wilmington, North Carolina, and trustees of the corporation's 401(k) and health plans on June 25 for failing to remit $48,379.42 of employee contributions to the corporation's 401(k) and health plans.

Dylan Mortgage is a mortgage lender for people with imperfect credit records. The corporation was formerly known as Chase Mortgage Brokers, Inc. The company's 401(k) plan covered 21 participants and had a total of $64,076 in plan assets as of December 31, 1997. The health plan provides group medical and pharmaceutical coverage to 106 participants and beneficiaries. Benefits were funded through stop loss insurance until the policy lapsed.

The lawsuit alleges Dylan Mortgage and Clarence M. Caviness violated the Employee Retirement Income Security Act (ERISA) by failing to:

• Segregate and remit $20,779.57 in employee contributions to the 401(k) plan and instead used the money to pay the operating expenses of the Dylan Mortgage
• Remit $24,228.37 in contributions to the health plan, which resulted in the lapse of the plan's stop-loss insurance policy
• Secure a fidelity bond for the health plan as required by law.

The department's lawsuit seeks to require that the defendants: restore to the plans all losses, including interest or lost opportunity costs, which occurred as a result of their improper actions and to correct all prohibited transactions; offset any restitution or other monetary recovery that they may be ordered to pay against any claims that they may have against the plans, including claims for benefits; and be removed from their positions as plan fiduciaries. It also requires that a successor trustee and administrator be appointed to take over the operation of the plans, distribute any proceeds returned to the plans and, if necessary, terminate the plans.

"Our goal is to ensure that consumers know that the department is committed to protect the benefits promised by employers," said Howard Marsh, director of PWBA's Atlanta Regional Office. "Employers and workers can reach us at 404.562.2156 for help with any problems relating to private-sector pension and health plans."

The department's lawsuit resulted from an investigation by the Atlanta Regional Office of the Pension and Welfare Benefits Administration into violations of ERISA It was filed in the federal district court in Wilmington, North Carolina.

(Chao v. Dylan Mortgage Brokers, Inc.
Civil Action No. 7:01-CV-117-F-1)

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