Labor Department Sues Executives of Two Defunct California Companies For Failing to Remit Employee Contributions

Archived News Release — Caution: Information may be out of date.

San Francisco, California - The U.S. Department of Labor sued the former executives of bankrupt Rapid Micro, Inc. of Castro Valley, and Network Guardians, Inc. of Hayward, September 20, for failure to remit to the Network Guardians, Inc. SAR-SEP Plan, $20,000 in contributions withheld from employees’ wages.

“This action demonstrates our commitment to protection of the hard-earned benefits of American workers,” said Bette Briggs, director of the department’s San Francisco regional office of the Pension and Welfare Benefits Administration (EBSA), which investigated the alleged violations of the Employee Retirement Income Security Act (ERISA).

The department’s lawsuit, originally filed September 12 in federal district court in San Francisco, alleged that Mark R. Koike and Rosemary Chan, presidents of the bankrupt companies Rapid Micro and its successor, Network Guardians, respectively, failed to timely forward the contributions of participants to their plan accounts since 1996. The defendants also allegedly commingled employee contributions with corporate assets and used the plan’s assets to benefit those companies.

The department is seeking to restore the contributions plus any lost interest, to permanently bar the defendants from serving as fiduciaries to any plan governed by ERISA, and to require them to cooperate with the plan trustee in distributing plan assets to participants.

Rapid Micro, which filed for Chapter 7 bankruptcy, ceased operating in June 1997. Network Guardians, which ceased operations on June 14, 1999, became the sponsor of the plan on October 1, 1997. The plan covered 13 participants employed by the companies.

Briggs noted that employers with similar problems, who are not yet the subject of an investigation by EBSA, may be eligible to participate in the department’s Voluntary Fiduciary Correction Program (VFCP). Participation in the VFCP requires employers to make workers whole, but allows them to avoid EBSA enforcement actions and civil penalties, as well as excise taxes.

“The VFCP gives plan sponsors a way to come into compliance with ERISA by restoring workers’ benefits while avoiding an investigation by EBSA,” said Briggs. “It protects workers’ health and retirement benefits and allows us to focus our resources on those who seek to avoid compliance.”

For more information about the VFCP see www.dol.gov/ebsa.

Employers and workers can contact the San Francisco Regional Office at 415.975.4600 or EBSA’s Toll-Free Employee & Employer Hotline number, 866.275.7922, for help with problems relating to private-sector pension and health plans.

(Chao v. Koike
Civil Action No. C-02-447 MEJ)

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