U.S. Labor Department Obtains Consent Judgment to Protect Employee Stock Ownership Plan Assets of Defunct Post Falls Company

Archived News Release — Caution: Information may be out of date.

Coeur D'Alene, Idaho - James C. Stone, former president, director and part owner of failed Alpha Health Services Inc. of Post Falls, Idaho, has agreed in a consent judgment obtained by the U.S. Department of Labor in U.S. Bankruptcy Court not to discharge debts owed to the company's employee stock ownership plan.

Stone's debt of $66,838 consists of plan assets he allegedly used in a failed personal investment scheme, plus losses to the plan resulting from prohibited real estate transactions. According to the judgment, Stone agrees to forfeit his individual account balance with the plan and to pay a penalty of 20 percent of the final amount paid to the plan. He is also permanently barred from serving in a fiduciary capacity to any employee benefit plan covered by the Employee Retirement Income Security Act.

"This sends a strong message to those responsible for employee benefit plans that they cannot use their employees' funds for their own personal benefit nor have their personal debts forgiven at the expense of their employees," said Francis Clisham, regional director of the department's Employee Benefits Security Administration (EBSA) in San Francisco.

Stone filed for personal bankruptcy December 3, 2004, after which the Labor Department filed an adversary complaint in U.S. Bankruptcy Court in Coeur d'Alene to prevent Stone from discharging in bankruptcy proceedings debts owed to the plan. The department alleged that Stone used plan assets to fund his personal investment in an overseas money scam. Stone was also charged with causing the plan to purchase a house and land from Alpha Health Services; reimburse himself for multiple improvements to the property; and purchase the property from the plan after he had lived there for almost a year rent-free, while the plan paid utilities.

According to the new trustee, the plan has not yet been terminated. The major assets of Alpha Health Services have been sold to Seven Oaks Community Homes Inc. of Boise. Alpha Health Services filed for bankruptcy in February 2004. There were approximately 149 employees participating in the plan when the company went out of business.

Employers and workers can reach EBSA's Seattle District Office, which investigated the case, at 206.553.4244 or through its toll-free number, 1.866.444.EBSA(3272), for help with problems relating to private-sector retirement and health plans.

(Chao v. Stone)
Case No. 2-04-BK-21776-TLM (U.S. Bankruptcy Court)

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