U.S. Department of Labor sues defunct Atlanta-based mortgage loan company to protect participants’ 401(k) assets

Atlanta – The U.S. Department of Labor has sued ZNET Financial Services, Abby Paschal and Farbod Zohouri for violating provisions of the Employee Retirement Income Security Act (ERISA).

Filed in the U.S. District Court for the Northern District of Georgia, the lawsuit alleges that the defendants violated their fiduciary responsibilities when they did not terminate the company’s 401(k) plan and distribute the assets to participants after the company ceased operations in 2004. The suit also alleges that the company failed to administer the plan after ceasing operations.

The Labor Department’s suit seeks a court order to appoint an independent fiduciary to terminate the plan and distribute its assets. In addition, the department is seeking a court order to permanently bar the defendants from serving as fiduciaries to any employee benefit plan subject to ERISA in the future.

“The Labor Department is committed to protecting participants’ pension rights whenever fiduciaries breach their obligations to plan participants,” said R.C. Marshall, regional director for the department’s Employee Benefits Security Administration (EBSA) in Atlanta, which investigated this case.

ZNET Financial Services was a mortgage broker in the Atlanta area until it closed in 2004. In November 2007, the company’s 401(k) plan had assets of approximately $68,913.

Employers with similar problems who are not yet subjects of EBSA investigations may be eligible to participate in the agency’s Voluntary Fiduciary Correction Program. Participation requires employers to make workers whole but allows them to avoid EBSA enforcement actions and civil penalties as well as any applicable excise taxes.

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. 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. For more information, see www.dol.gov/ebsa.

Solis v. ZNET Financial Services Inc.
(Civil Action File Number 1:09-cv-2207)

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