U.S. Labor Department Sues D.C. Attorney for Alleged Violations Involving 2 Pension Plans of Bankrupt Tennessee Company

Archived News Release — Caution: Information may be out of date.

Atlanta - The U.S. Department of Labor has sued a District of Columbia lawyer for his participation in the improper transfer of the assets of two pension plans sponsored by bankrupt SCT Yarns Inc. headquartered in Chattanooga, Tennessee.

“The department will vigorously pursue individuals who knowingly violate the law,” said Bradford P. Campbell, acting assistant secretary of labor for the Employee Benefits Security Administration (EBSA). “Our action today is designed to recoup for the plan any fees received by the defendant.”

The lawsuit alleges that David Johnston served as an escrow attorney for various transactions involving at least $6.2 million in plan assets, and knowingly participated in the improper transfer of plan assets to companies affiliated with SCT Yarn president Kenneth H. Combs Jr. He also allegedly received fees from assets of the plans following the improper transfers.

The suit, filed in U.S. District Court for the Eastern District of Tennessee, seeks to require that Johnston disgorge all profits and financial benefit received from the improper transactions with plan assets.

SCT manufactured yarn for the textile industry. The company sponsored two retirement plans covering 771 participants, according to the latest data available to the Labor Department. The Pension Benefit Guaranty Corporation has taken over the retirement plans for hourly and salaried employees and will pay benefits to retirees.

The civil investigation was conducted by the Atlanta regional office of EBSA. Employers and workers can reach the Atlanta office at 404.562.2156 or through EBSA’s toll-free number, 1.866.444.EBSA (3272), for help with problems relating to private-sector retirement and health plans.

In fiscal year 2005, EBSA achieved monetary results of $1.7 billion related to pension, 401(k), health and other benefits for millions of American workers and their families.

(Chao v. Johnston)
Civil Action No. 1:06-cv-00226

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Archived News Release — Caution: Information may be out of date.

Contact Name: Gloria Della/Peter Hong
Phone Number: 202.693.8664/202.693.4676