Labor Department Seeks Restoration of Losses to Santa Monica Profit Sharing Plan

Archived News Release — Caution: Information may be out of date.

San Francisco, California - The U.S. Department of Labor filed a complaint against L.A. Creative, Inc., sponsor of the L.A. Creative 401(k) Plan for alleged violations of the Employee Retirement Income Security Act (ERISA). The department is seeking to restore losses of withheld employee contributions to the company’s employee benefit plan that was based in Santa Monica, California The plan was a prototype profit sharing plan that provided retirement benefits for eligible employees of L.A. Creative, Inc.

Filed November 19, 2002, in the U.S. District Court for the Central District of California, the suit results from an investigation by the Los Angeles Regional Office of the Department’s Pension and Welfare Benefits Administration (PWBA). Besides L.A. Creative, Inc., the complaint names as defendant Francis L. Coiro who served as fiduciary of the plan. The company, whose sole owner was Coiro, was the plan administrator and the named fiduciary for the plan.

According to Billy Beaver, Los Angeles regional director of PWBA, the alleged violations of ERISA began when the company repeatedly failed to timely remit employee contributions to the plan from its inception. In addition, the company failed to remit $34,330 in withheld employee contributions. The complaint alleges that Coiro used the withheld employee contributions to pay company operating expenses.

As of the date of the complaint, the plan is owed $33,093 (excluding lost earnings) after one of the company’s debtors reimbursed one of the participants after that participant brought suit through the State of California Labor Commission.

The complaint seeks to have the defendants restore the withholdings and lost earnings to the plan, to have the defendants enjoined from acting as fiduciaries to any ERISA-covered plans in the future, and to have an independent fiduciary with full discretionary authority to manage and administer the plan and its assets appointed to undertake the collection of delinquent contributions and lost assets from the defendants and to effectively terminate the plan.

Beaver noted that plan sponsors with similar problems, which are not yet subject of an investigation by PWBA, 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 PWBA enforcement actions and civil penalties as well as applicable excise taxes. For more information about the VFCP, visit www.dol.gov/pwba.

(Chao v. L.A. Creative, Inc., Francis L. Coiro, L.A. Creative, Inc. 401(k) Plan)

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