Labor Department Sues Bankrupt Florida Firm and Trustees For Misuse of 401(k) Pension Assets

Archived News Release — Caution: Information may be out of date.

Atlanta, Georgia - The U. S. Department of Labor sued bankrupt Dynamic Imaging Corp. of Sunrise, Florida and the trustees of its 401(k) plan on June 10, for failure to forward $17,212 in contributions withheld from employees’ wages to the plan and to properly administer the plan in accordance with federal employee benefit law.

“This action reaffirms our commitment to protection of the hard-earned benefits promised by employers,” said Howard Marsh, director of the Atlanta Regional Office of the Pension and Welfare Benefits Administration (PWBA).

According to the suit, the firm and trustees Richard B. Lopez, Jr., Jeffrey L. Ingram and James E. Baker violated the Employee Retirement Income Security Act (ERISA) by failing to deposit into the plan employee contributions over the period from September 2000 to May 2001. The suit also alleges that the trustees used the money for purposes other than to pay benefits, did not obtain a fidelity bond, and failed to properly terminate the plan and distribute the assets to participants.

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 plan, to permanently bar them from serving in positions of trust to any plan governed by ERISA and to appoint an independent fiduciary to manage the plan. The suit also asks the court to offset the plan accounts of the trustees to restore plan losses and to re-distribute those assets to the remaining plan participants.

Dynamic Imaging Corp. is a document imaging software development company. The firm ceased operations and filed for Chapter 7 bankruptcy on November 1, 2001. The 401(k) plan sponsored by the firm had 17 participants and had assets of $44,814 as of March 31, 2002.

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, filed in federal district court in Fort Lauderdale, Florida, resulted from an investigation conducted by the Miami District Office of PWBA. Employers and workers can contact the Miami District Office at 954.424.4022 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. Dynamic Imaging Corp.
Civil Action No. 02-60797)

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Archived News Release — Caution: Information may be out of date.