U.S. Labor Department obtains court order requiring officers of New York and California textile companies to restore 401(k) assets

Archived News Release — Caution: Information may be out of date.

New York – Two officers of defunct New York City and Santa Monica, California-based textile companies American Fabrics Co. and Beverly Trimming Co. agreed to restore $111,260 to the companies’ 401(k) plan to resolve a Labor Department lawsuit alleging violations of the Employee Retirement Income Security Act (ERISA).

The suit, filed in the U.S. District Court for the Southern District of New York in December 2006, alleged that the companies, along with plan trustees Richard Haik and Mitchell Ostrover, violated ERISA by failing to remit to the plan contributions and loan repayments deducted from employees’ paychecks between January 2002 and December 2003.

“Trustees of a 401(k) plan have a responsibility to ensure that the assets of the plan are used solely to benefit participants. One of the most important responsibilities is putting money from workers’ wages into their 401(k) accounts on time,” said Bradford P. Campbell, assistant secretary of the Labor Department’s Employee Benefits Security Administration (EBSA).

American Fabrics, which also had operations in Bridgeport, Connecticut, and Bogalusa, Louisiana, ceased operations in the summer of 2006. Beverly Trimming ceased operations in 2004. The American Fabrics Co. 401(k) Savings Plan covered approximately 106 participants from both companies and held $821,139 in assets as of June 30, 2006.

A consent judgment obtained by the Labor Department orders Haik and Ostrover to restore to the plan $111,260 plus lost opportunity costs owed to the plan. The defendants also are ordered to appoint Jacqueline Carmichael of JM Pension Advisory Inc. as the plan’s independent fiduciary responsible for plan management, termination of the plan and distribution of its assets to eligible participants and beneficiaries. In addition, the defendants are permanently barred from serving as fiduciaries to any ERISA-covered plan.

The suit resulted from an investigation by EBSA’s regional office in New York City. Employers and workers can contact the office at 212.607.8600 or toll-free at 866.444.3272 for help with problems relating to private sector pension 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. For more information, visit www.dol.gov/ebsa.

Chao v. Haik
Civil Action Number: 06-CV-15359 (PKC)(MHD)

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