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News Release
Labor Department Sues Former Ohio Executive Over Profit Sharing Plan Investments
Archived News Release — Caution: Information may be out of date.
Cleveland, Ohio - The U.S. Department of Labor sued defunct Lakewood Manufacturing Company of Lakewood, Ohio and its president on December 18, 2002 to recover losses suffered by the company’s profit sharing plan on numerous loans and transfers totaling $505,842 made to benefit the corporate executive and companies owned by him.
Richard Peplin, Jr. allegedly violated the Employee Retirement Income Security Act (ERISA) by investing all of the plan’s assets in risky investments with companies affiliated with him. He allegedly loaned plan assets to Viatech Communications Group, Inc. and its subsidiary Psychic Discovery Network. The companies stopped operating in August 1997 without repaying the plan loans.
Peplin also failed to execute agreements between the plan and Viatech for stock investments and made several additional unsecured loans with plan assets to an unrelated individual and other corporations. In addition, the suit charges him with miscalculating the account balances of plan participants, failing to obtain a fidelity bond as required by law and failing to provide workers with descriptions of the rules of the plan.
Lakewood Manufacturing Company manufactured parts for military contractors and sponsored the profit sharing plan for 19 participants. Peplin acted as the sole trustee of the profit sharing plan after the retirement of his father in 1996. In 1997, Peplin began to switch the plan’s investments.
“Individuals who manage pension plans are forbidden from using the plan’s assets as their personal bank accounts,” said Joseph Menez, Regional Director of the department Cincinnati Regional Office that investigated the case. “Our lawsuit is designed to return money improperly managed and invested so it can be available to pay pension benefits.”
The suit seeks a court order to restore to the plan all losses plus interest, to correct all prohibited transactions, to replace the company and Peplin with an independent fiduciary to manage the plan, and to permanently bar them from serving other ERISA-covered plans in the future. The suit was filed in federal district court in Cleveland.
(Chao v. Lakewood Manufacturing Co.
Civil Action No. 1:02CV2470)
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Archived News Release — Caution: Information may be out of date.