U.S. Labor Department obtains judgment ordering restitution and appointing independent fiduciary for 401(k) plan abandoned by Lockport, New York, employer

Buffalo, New York – The U.S. Department of Labor has obtained a default judgment appointing an independent fiduciary to manage the abandoned 401(k) plan of defunct Franbilt Inc., which was a steel fabrication plant located in Lockport, New York. The court also has ordered the former owner of the company, Thomas Barnes, to pay $145,094 in restitution to the plan.

In March 2009, the Labor Department filed a lawsuit in the U.S. District Court for the Western District of New York against Barnes and Michael Burns, the company’s chief operations officer and chief financial officer, alleging violations of the Employee Retirement Income Security Act (ERISA). The defendants served as trustees of the 401(k) retirement plan.

The suit alleged 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 of more than $20,000. The suit also 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.

“Misuse of employee benefit plan funds for corporate purposes will not be tolerated by the Labor Department,” said Jean Ackerman, regional director of the department’s Employee Benefits Security Administration (EBSA) in Boston, Massachusetts. “We have pursued this case to make sure the funds belonging to the participants of this plan are rightfully restored to them.”

The department previously entered into a partial consent judgment with Burns that permanently prohibits him from serving as a fiduciary to any employee benefit plan covered by ERISA.

The default judgment against Barnes removes him as trustee of the plan, permanently bars him from ever serving as a fiduciary to any other ERISA covered plan, orders him to pay full restitution to the plan, and appoints an independent fiduciary to manage the plan, distribute the plan’s assets to the rightful plan participants and then properly terminate the plan.

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 2009, EBSA achieved monetary results of $1.3 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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