U.S. Department of Labor Sues Washington Company and President to Restore Employee Contributions to Retirement Plan

Archived News Release — Caution: Information may be out of date.

Seattle - The U.S. Department of Labor has sued Washington-based Sumas Transport, Inc. (STI) and its president, Dennis Scheffer, for failing to deposit employees’ salary reduction contributions into the company’s retirement plan. The suit seeks to restore losses to the retirement plan and remove Scheffer from his position as fiduciary to the plan.

“The Labor Department is committed to protecting the benefits of America’s workers and retirees,” said Francis C. Clisham, regional director in San Francisco for the Labor Department’s Employee Benefits Security Administration (EBSA), which investigated the case. “We will hold accountable those who misuse workers’ retirement assets.”

The suit, filed December 29, 2006, in federal district court in Seattle, alleges that Scheffer and STI violated their fiduciary duties under the Employee Retirement Income Security Act (ERISA) when they failed to remit more than $28,000 in contributions deducted from employees’ paychecks from June 30, 2001 through March 22, 2003. The plan’s governing documents allowed participants to make salary reduction contributions to the plan.

The suit seeks to require the defendants to restore to the plan all losses including contributions and lost opportunity costs. The department also seeks to permanently enjoin Scheffer from serving in a fiduciary capacity to any employee benefit plan covered by ERISA, remove him from any position to the plan, and appoint an independent fiduciary to distribute the plan’s assets to eligible participants and beneficiaries.

Based in Bellingham, Washington, STI was engaged in the business of excavating and hauling waste, sand and gravel in Oregon and Washington. STI filed for Chapter 11 bankruptcy on November 5, 2003, and ceased business operations shortly after converting to Chapter 7 bankruptcy on May 16, 2005. As of October 24, 2004, the STI retirement plan covered 10 participants and held approximately $67,039 in assets.

The department’s suit resulted from an investigation conducted by EBSA’s district office in Seattle. Employers and workers can call the EBSA’s office in Seattle at 206.553.4244 or toll-free at 1.866.444.EBSA (3272).

Employers with similar problems who are not yet the subject of an investigation by EBSA may be eligible to participate in the department’s Voluntary Fiduciary Correction Program (VFCP). Participation in the program requires employers to correct any violations but allows them to avoid EBSA enforcement actions and civil penalties as well as any applicable excise taxes. For more information about the VFCP, see: www.dol.gov/ebsa.

(Chao v. Sumas Transport, Inc.)
Civil Action No. CO6-1848RSL

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