U.S. Labor Department obtains judgment prohibiting former Lockport, New York, employer from future fiduciary oversight of employee benefit plans

Buffalo, New York – The U.S. Department of Labor has obtained a consent judgment prohibiting a former trustee of the Franbilt Inc. 401(k) Plan from serving as a fiduciary to any employee benefit plan covered by the federal Employee Retirement Income Security Act (ERISA). Franbilt Inc., now defunct, was a steel fabrication plant located in Lockport, New York.

The Labor Department filed a lawsuit in the U.S. District Court for the Western District of New York against Thomas Barnes, one of the owners of Franbilt Inc., and Michael Burns, the company’s chief operations officer and chief financial officer, alleging violations of ERISA. The defendants served as trustees of the 401(k) plan, which was set up to provide retirement benefits for employees of the company.

An investigation by the department’s Employee Benefits Security Administration (EBSA) revealed that the defendants often allowed the company to delay forwarding employee contributions and loan repayments to the plan during a two-and-a-half year period. As a result, the plan suffered lost opportunity costs totaling more than $20,000. Even more serious were allegations related to two plan participants who had requested lump sum distributions of their 401(k) plan accounts in 2005 and 2006 totaling more than $125,000. The Labor Department’s suit alleged that in 2005 and 2006 the defendants allowed the company to request more than $125,000 from the plan’s custodial trustee and subsequently deposited the funds into the company’s corporate account. The assets were never forwarded to plan participants.

Said Jean Ackerman, EBSA’s regional director in Boston, “Such cavalier and reckless misuse of employee benefit plan funds will not be tolerated by the Labor Department. We will pursue this case until the funds belonging to the participants of this plan are rightfully restored to them.”

A partial consent judgment agreed to by the Labor Department and Michael Burns prohibits him from ever again serving as a fiduciary to any employee benefit plan covered by ERISA. The department continues to pursue its litigation against Thomas Barnes.

This case was investigated by EBSA’s Boston Regional Office, which can by reached at 617.565.9600. Employers and workers may also call toll-free at 866.444.3272 for help with problems relating to private sector pension and health plans. In fiscal year 2008, EBSA achieved monetary results of $1.2 billion related to pension, 401(k), health and other benefits for millions of American workers and their families. Additional information can be found at www.dol.gov/ebsa.

Solis v. Thomas Barnes, Michael Burns and the Franbilt Inc. 401(k) Plan
Civil Action Number: 1:09-CV-00286-RJA

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