U.S. Labor Department obtains preliminary injunction against trustees of New York City pension plan for violating employee benefits law

New York – The U.S. Department of Labor has obtained a preliminary injunction barring trustees Samuel Kohl, Caren Kohl and Welko Inc. of New York City from conducting business with, or on behalf of, the Welko Inc. Pension Plan, unless approved by the court. The U.S. District Court for the Southern District of New York also ordered the defendants to turn over to the court all of the plan's cash assets.

The Labor Department sued the defendants for allegedly causing the plan to engage in prohibited transactions in violation of their fiduciary duties under the Employee Retirement Income Security Act. They allegedly diverted plan assets to Samuel Kohl, the company and others whose interests were adverse to those of the plan; failed or refused to pay fees on a Manhattan condominium owned by the plan that resulted in litigation, fees and a possible reduction in the property's value; refused to distribute benefits to a qualified plan participant; and failed or refused to account for plan assets, income and losses. In addition, the department alleges that the Kohls used plan funds to purchase a Manhattan condominium unit and then housed their personal nanny in the unit while failing to collect rental income for the plan. Samuel Kohl was alleged to have used plan assets to obtain a home equity line mortgage but did not apply the proceeds to benefit the plan or its participants.

"The primary responsibility of plan fiduciaries is to the workers who entrusted their funds and their futures to them, not to themselves or anyone else," said Jonathan Kay, New York regional director of the department's Employee Benefits Security Administration, which conducted the investigation leading up to the litigation. "That responsibility was repeatedly and flagrantly disregarded by these defendants, and we are taking legal action to protect the benefits to which the participants are entitled."

In its suit, the department is also seeking to require the defendants to correct any prohibited transactions; make good any losses arising from their violations; disgorge all profits from their violations; and account for the plan's assets and liabilities, including any investment gains and losses and any income earned or payments received by the plan since Aug. 28, 2001. The suit also calls for the defendants' permanent removal as plan fiduciaries and service providers, the appointment of an independent plan fiduciary to pay out benefits to eligible nonfiduciary plan participants and to permanently prohibit the defendants from serving as fiduciaries or service providers to any ERISA-covered benefit plan.

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. Employers and workers can reach EBSA's New York office at 212.607.8600 or toll-free at 866.444.3272 for help with problems relating to private sector retirement and health plans.

Solis v. Kohl
Civil Action Number 10-CV-4640

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