Maryland Court Stops Pension Reimbursement to Company for Past Plan Expenses

Archived News Release — Caution: Information may be out of date.

Washington, DC - An August 24 federal court hearing will be the next step in the Labor Department's efforts to prevent a Bethesda, Maryland-based engineering firm from taking money out of its pension plan to pay company expenses whose legality is in dispute. The department obtained a temporary restraining order last week blocking the transfer of about $700,000 to Information Systems and Networks Corp.

In an amended suit also filed last week, ISN was named as a defendant to the original lawsuit filed on November 28, 2000. ISN and plan administrator Roma Malkani allegedly violated the Employee Retirement Income Security Act (ERISA) by improperly attempting to transfer plan assets to reimburse the company for purported expenses from 1994 through 2000. Immediately after the department filed its original lawsuit, the defendants sought reimbursement from the plan.

The amended suit also alleges that the defendants directed the custodian to forfeit the account balances of certain participants who were already vested under the plan. The original lawsuit alleged that plan administrator Malkani failed to collect $160,000 in required employer contributions owed to the pension plan and to timely allocate interest on delinquent employee contributions to the accounts of profit sharing plan participants.

The department asked the court order to require restoration of all losses to the plans and repayment to participants of any illegally forfeited assets. It also seeks to remove Malkani as a plan official and permanently bar her from serving in a position of trust to any ERISA-covered plan except one which includes only Malkani and immediate family members. The lawsuit also asks the court to appoint an independent fiduciary to manage and administer the assets of the plans.

ISN is an engineering and systems integration services firm which sponsors the pension and profit sharing plans. The pension plan covered 398 participants in 1996 and is funded primarily by employer contributions. The profit sharing plan is funded by employer and employee contributions.

This case resulted from an investigation conducted by the Washington, DC District Office of the department’s Pension and Welfare Benefits Administration (PWBA) into alleged violations of ERISA. The amended suit was filed in federal district court in Baltimore, Maryland.

(Chao v. Malkani
Civil Action No. S-00-3491)

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