U.S. Labor Department recovers more than $9 million for retirement plans of bankrupt Aloha Airlines

San Francisco – The U.S. Department of Labor has entered into settlement agreements with Aloha Airlines Inc., Bank of Hawaii and First Hawaiian Bank, which agreed to pay $9,545,454 to the airline’s three pension plans for losses the plans suffered on investments in stock of the airline’s holding company. Both Aloha and its holding company are bankrupt. The money will be paid to the Pension Benefit Guaranty Corp., the trustee of the plans.

The Labor Department contended that Aloha and Bank of Hawaii, as the plans’ fiduciaries, breached their duties under the Employee Retirement Income Security Act (ERISA). They allegedly caused or permitted the plans to buy newly issued stock of the airline’s holding company in September 2000 for more than its fair market value and without investigating the merits of the purchase for the plans, as well as failed to take steps to protect the plans as the stock lost all of its value.

In the department’s view, the transaction also was prohibited because there was no purchaser independent of the issuer. Additionally, the department contended that First Hawaiian Bank, which was an investment manager for a portion of the plans’ investments not involved in the transaction, facilitated the stock transaction and therefore knowingly participated in the fiduciary breaches or violated its duties as a co-fiduciary.

Under separate settlement agreements, Aloha Airlines has agreed to pay a total of $5.5 million, including $500,000 in civil penalties paid to the federal government. The banks each agreed to pay $2.5 million, for a total of $4,545,454 in restitution and $454,546 in civil penalties.

“We will vigorously pursue plan fiduciaries who engage in transactions with employer securities that are prohibited by ERISA,” said Alan D. Lebowitz, deputy assistant secretary for the Labor Department’s Employee Benefits Security Administration (EBSA).

In an earlier settlement agreement, in September 2008, PriceWaterhouseCoopers LLP agreed to pay $250,000 to the plans and a $50,000 civil penalty. The Labor Department contended that PriceWaterhouseCoopers, the auditor for the plans and the companies, knowingly participated in the fiduciary breaches.

The settlements resulted from an investigation conducted by EBSA’s Los Angeles Regional Office. Employers and workers may contact that office at 626.229.1000 or 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. For information about ERISA enforcement, visit www.dol.gov/ebsa/erisa_enforcement.html.