U.S. Department of Labor obtains settlement with Costello Forensic Accounting P.C. and auditors to SCT Yarns Inc. retirement plans

Archived News Release — Caution: Information may be out of date.

Atlanta – The U.S. Department of Labor has reached a settlement with Costello Forensic Accounting P.C. and its auditors resolving the department lawsuit alleging the Chattanooga, Tennessee accounting firm violated the Employee Retirement Income Security Act (ERISA).

The firm, formerly known as Costello, Strain, & Co. P.C., served as the independent qualified public accountant for the Standard Coosa Thatcher (SCT) Yarns pension plans. D. Michael Costello was the president and a partner in the firm while Sharon Hamrick was a certified public accountant involved in the audit of SCT Yarns plans.

The suit, filed in late 2007, alleged that the accounting firm knowingly participated in violations of ERISA committed by other fiduciaries of the pension plans when it failed to identify and disclose serious deficiencies in the administration of the plan. The deficiencies included the improper purchase of a Park City, Utah, vacation home with pension assets.

“The Labor Department is pleased that this agreement requires these auditors and Costello Forensic Accounting to obtain specialized knowledge to conduct ERISA audits or manage employee benefit plan audits in the future,” said Rebecca Marshall, director of the Atlanta Regional Office of the department’s Employee Benefits Security Administration (EBSA), which investigated this case.

Under the settlement, the accounting firm must repay $12,500 in fees it collected from the plans to the Pension Benefit Guaranty Corp., which has taken over the pension plans and is now paying benefits to the retirees.

Hamrick agrees to complete professional education related to employee benefit plans within a three-year period before she signs an ERISA plan audit opinion or manages a plan audit engagement.

If Costello Forensic Accounting should revive its business operations, the agreement requires that the firm establish a program to ensure that all personnel conducting ERISA audit engagements have current knowledge of rules, regulations and standards governing such audits. The firm also must designate a partner to take responsibility for the quality of ERISA-related audits.

Employers and workers can reach EBSA’s Atlanta Regional Office at 404.302.3900 or toll-free at 866.444.3272 for help with problems relating to private sector retirement and health plans. In fiscal year 2007, EBSA achieved monetary results of $1.5 billion related to pension, 401(k), health and other benefits for millions of American workers and their families.

Chao v. Costello Forensic Accounting P.C.
Civil Action Number 1:07-cv-273

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