Labor Department Lawsuit Settled With RADAC Corporation Officials Over Employee Stock Ownership Plan

Archived News Release — Caution: Information may be out of date.

Covington, Kentucky - A lawsuit filed in federal district court here by the U.S. Department of Labor’s against the Dayton, Kentucky-based RADAC Corp. and company officials has been resolved in the department’s favor. Defendants have agreed to pay $100,000 on a pro rata basis to 129 former participants and beneficiaries of the company’s Employee Stock Ownership Plan (ESOP) who received distributions and did not retain their RADAC stock in December 1994.

RADAC and the individual defendants have provided documentation reflecting the deposit of the $100,000 into an escrow account and have agreed to distribute the funds to the affected parties within 120 days of the court’s order, which was entered on September 10.

“This action demonstrates our commitment to protect the hard-earned benefits of American workers," said Joseph Menez, director of the department’s Cincinnati regional office of the Pension and Welfare Benefits Administration, which investigated the alleged violations of the Employee Retirement Income Security Act (ERISA).

According to the department’s suit, RADAC Corp. and company officials terminated the ESOP and distributed plan assets to participants other than themselves using an independent appraisal that allegedly valued RADAC stock held by the plan at less than its fair market value.

Besides RADAC Corp., individual defendants were Richard L. Morris, president and chief executive officer of RADAC and chairman of its board of directors, and corporate officers and directors Joseph C. Von Lehman, Jr., James E. Cornwell and H. Thomas Smith, who is now retired from the company. Morris served as the plan’s administrator.

The department’s lawsuit alleged that the defendants violated their fiduciary duties to the plan and committed a prohibited transaction under ERISA when RADAC Corp. repurchased the plan’s employer stock from participants and beneficiaries for less than fair market value upon the termination of the plan.

Employers and workers can contact the Cincinnati regional office at 1.859.578.4680 or EBSA’s Toll-Free Employee & Employer Hotline number, 1.866.275.7922, for help with problems relating to private-sector pension and health plans.

(Chao v. RADAC Corporation, Richard L. Morris; H. Thomas Smith; James E. Cornwell, and Joseph C. VonLehman, Jr. Civil Action No. 2000-52)

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