Labor Department Sues Virginia Firm and Owner Over Misuse of Retirement and Health Plan Assets

Archived News Release — Caution: Information may be out of date.

Washington, DC - The U. S. Department of Labor sued bankrupt Direct Press Modern Litho, Inc. of Fredericksburg, Virginia and its owner on June 3, 2002 for failure to forward contributions withheld from employee paychecks to the company’s retirement savings and health plans.

“This action reaffirms our commitment to protection of the hard-earned benefits promised by employers,” said Mabel Capolongo, Director of the Philadelphia Regional Office of the Pension and Welfare Benefits Administration (PWBA).

According to the suit, Direct Press and Jose Pizzini violated the Employee Retirement Income Security Act (ERISA) by failing to deposit into the retirement savings and health plans contributions of employees at various times between 1999 to June 1, 2001.

The department simultaneously filed an adversary complaint in federal bankruptcy court to prohibit Jose Pizzini from discharging any debts owed to the plans. The department contends Pizzini’s failure to remit the employees’ plan contributions arose from fraud, misuse of plan assets or embezzlement. On February 26, 2002, the defendants filed for Chapter 7 bankruptcy.

The suit seeks a court order to require that the defendants reimburse the plan for all losses with interest, to remove them from their fiduciary positions with the plans and to appoint an independent fiduciary to manage the plans. The suit also asks the court to require the offset of the plan accounts of Pizzini to restore plan losses and to re-distribute those assets to the remaining plan participants.

Direct Press was a printing company that operated 10 satellite offices throughout the country. The plans covered 66 participants and had cumulative assets of $1,074,397 as of December 31, 1998.

The department's Voluntary Fiduciary Correction Program (VFCP) allows plans to correct failures in forwarding contributions withheld from employees’ paychecks and certain other ERISA violations. Eligible applicants that properly correct transactions under the program will not be subject to the enforcement action described above or liable for civil penalties. Excise tax liability under section 4975 of the Internal Revenue Code is also eliminated for certain transactions.

This suit and adversary complaint, filed in federal district court in Alexandria, resulted from an investigation conducted by PWBA’s Washington District Office. Employers and workers can contact the district office at 301.713.2000 or PWBA's Toll-Free Employee & Employer Hotline number: 1.866.275.7922, for help with any problems relating to private-sector pension and health plans.

(Chao v. Pizzini
Civil Action No. 02-80866-RGM)

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