US Labor Department sues pension plans trustee of 2 defunct New York City garment companies to recover millions of dollars in misused assets

NEW YORK – The U.S. Department of Labor has sued trustee Colette Mordo for alleged misuse of more than $4.6 million in plan assets of the Sadimara Knitwear Inc. and the Stallion Knits Ltd. defined benefit pension plans, in violation of her fiduciary duties under the Employee Retirement Income Security Act. The lawsuit is based on an investigation by the department's Employee Benefits Security Administration.

Sadimara Knitwear Inc. and Stallion Knits Ltd. were garment companies headquartered in Manhattan. The companies sponsored the plans to provide pension benefits to their employees.

"Such flagrant misuse of pension plan assets is intolerable," said Phyllis C. Borzi, the Labor Department's assistant secretary for employee benefits security. "The law clearly prohibits those entrusted with the assets of an employee benefit plan from intentionally misusing those funds to enrich themselves or their family members."

The lawsuit states that Colette Mordo, husband Matthew Mordo and son Alan Mordo were all participants in the plans, as were employees, officers and/or owners of the companies, which makes them parties in interest with respect to the plans. Matthew and Alan Mordo are both deceased. Colette Mordo also had ownership in two other companies, International Design Concepts LLC and Apparel Group International LLC, which are parties in interest because of her ownership.

The suit, filed in the U.S. District Court for the Southern District of New York, alleges that Colette Mordo authorized the plans to make improper loans and transfers of plan assets over several years to parties in interest, including members of the Mordo family, and both International Design Concepts LLC and Apparel Group International LLC. The loans and transfers from both plans amounted to more than $4.6 million.

The suit alleges that, between 2002 and the present, plan trustees and fiduciaries, including Colette Mordo, excluded eligible employees from participation in the plans and/or otherwise interfered with eligible employees' ability to accrue benefits under the plans. In addition, the suit alleges that she allowed participants who received benefit distributions from the plans to be paid less than they were entitled to receive.

The department's suit asks the court to order Colette Mordo to restore all losses incurred by the plans, plus lost opportunity costs that resulted from her improper actions, and to permanently bar her from serving as a fiduciary to any ERISA-covered plan in the future. The suit also asks the court to appoint an independent fiduciary to administer these plans and to order the plans to offset any benefits owed to Colette Mordo against the amount she owes the plans.

This case resulted from an investigation by EBSA's New York Regional Office. Employers and workers can contact that office at 212.607.8600 or call EBSA toll-free at 866.444.3272 for help with any problems relating to private sector pension and health plans. Additional information can be found at http://www.dol.gov/ebsa.

Solis v. Colette Mordo
Civil Action Number: 10-CV-8846