U.S. Labor Department seeks to recover employee contributions for participants of Austin, Texas, 401(k) plan

Archived News Release — Caution: Information may be out of date.

Austin, Texas – The U.S. Department of Labor has sued fiduciaries of the 401(k) plan for employees of the Brown Schools Inc., based in Austin, for failure to forward employee contributions to the company’s 401(k) plan and misusing those assets to pay the operating expenses of the school.

The Brown Schools are a group of psychiatric hospitals, boarding schools, residential treatment centers and community education programs for troubled children and teenagers. At the time of the alleged violations of the Employee Retirement Income Security Act (ERISA), the schools operated in Texas, California, Florida, Idaho and Vermont.

“The department is committed to protecting the benefits of America’s workers and retirees,” said Bradford P. Campbell, assistant secretary of labor for the Employee Benefits Security Administration (EBSA). “We will not hesitate to act to hold accountable those who misuse workers’ retirement assets.”

The suit alleges that plan administrator Rodney Young and corporate officials Robert Naples, president and chief executive officer, and Bryan Havel, assistant controller and treasurer, failed to forward employee contributions owed to the 401(k) plan over a three-month period. The defendants also allegedly failed to segregate 401(k) assets from those of the school, used the assets to benefit a party related to the plan and failed to properly administer the plan.

The suit seeks a court order requiring the individual defendants to restore all losses and profits plus any lost opportunity costs. The department also asks the court to remove Naples and Havel from their positions with the plan and permanently bar Naples from future service to any employee benefit plan governed by ERISA. In addition, the department asks the court to retain Young as plan administrator until all assets of the plan are distributed to participants. Preliminarily, plan losses to approximately 150 participants are estimated at $95,000 plus interest.

The company has been in business since 1940. However, all but one of the schools filed for Chapter 7 bankruptcy in March 2005. The 401(k) plan currently has no assets and previously covered approximately 1,500 participants, according to the latest information available to the Labor Department.

In fiscal year 2007, EBSA achieved monetary results of $1.5 billion related to the pension, 401(k), health plans and other benefits for millions of American workers and their families. This case was investigated by EBSA’s regional office in Dallas. Employers and workers can reach EBSA at 972.850.4500 or toll-free at 866.444.3272 for help with problems relating to private sector retirement and health plans.

Chao v. Naples
Civil Action No. A08CA529LY

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