U.S. Labor Department judgment orders attorney and fiduciaries of Standard Automotive 401(k) plan to restore $340,000 to New Jersey plan

Archived News Release — Caution: Information may be out of date.

Philadelphia – The U.S. Department of Labor has obtained a judgment ordering a former executive of bankrupt Standard Automotive Corp., Hillsborough Township, New Jersey and former trustees of the company’s 401(k) plan to pay $340,000 in restitution to the plan.

The department sued defendants Anthony L. Scialabba, Morton Batt and John E. Elliot for alleged misuse of plan assets to pay Scialabba’s law firm for legal services that were improper, unnecessary and unreasonably costly. Scialabba, who was a plan trustee, allegedly approved a significant portion of the plan’s payment for legal services provided by his firm at various times from September 2001 to July 2003 without the approval of the corporation’s board of directors. After Scialabba resigned in December 2003, trustee Batt approved payment of additional improper fees to Scialabba’s law firm and retained the firm as special counsel to the plan. Former board of directors chairman Elliott authorized the hiring of Scialabba and then Batt to be trustees of the plan.

In related private litigation, Scialabba and Citistreet Inc. agreed to pay an additional $301,000 to the plan. A further $37,500 was restored to the plan from an escrow account at Scialabba’s law firm. In addition to the monetary restitution, Scialabba and Batt are permanently enjoined from generally serving as fiduciaries to employee benefit plans governed by the Employee Retirement Income Security Act. In November 2006, Jacqueline Carmichael was appointed as the plan’s independent fiduciary, with authority to terminate the plan and distribute its assets to participants.

“The Labor Department’s legal action restores to the workers of Standard Automotive the retirement benefits to which they are entitled,” said Bradford P. Campbell, assistant secretary of the department’s Employee Benefits Security Administration (EBSA). “Protecting workers’ benefits is a top priority for this administration.”

The corporation, a holding company for manufacturers of components for the trucking and aerospace industries, filed for bankruptcy in March 2002. As of January 2005, the plan had $2,520,316 in assets.

The case was investigated by EBSA’s New York Regional Office. Employers and workers can reach the New York office at 212.607.8600 or toll-free at 1.866.444.EBSA (3272) for help with problems relating to private sector retirement and health plans.

Chao v. Scialabba
Civil Action Number 1:05-cv-3732

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