Labor Department files suit to recover more than $26K for participants of Aware Environmental Inc. retirement plan in North Carolina

Date of Action: Dec. 23, 2014

Type of Action: Complaint

Names of Defendants: Michael Omstead Smith; Aware Environmental Inc.; and the Aware Environmental Inc. 401(k) Profit Sharing Plan and Trust

Allegations: The Aware Environmental Inc. 401(k) Profit Sharing Plan and Trust was established on May 15, 1990, by Aware Environmental Inc. of Charlotte, North Carolina. Michael Omstead Smith was the company’s president and a plan fiduciary and the company was named as the plan administrator. Between Jan. 8, 2010 and April 16, 2011, the defendants failed to remit $26,155.76, in employee contributions that were deducted from employees’ compensation, to the plan. 

The plan’s adoption agreement permits participants to obtain loans. From Sept. 5, 2006 through March 20, 2007, the defendants failed to remit participant loan repayments, deducted from employees’ compensation, to the plan. As a result, one participant loan was deemed in default and suffered tax consequences for loan repayments not being remitted to his loan. Furthermore, between Jan. 8, 2010 and April 16, 2011, the defendants failed to ensure that amounts withheld from employee paychecks were remitted to the plan as soon as they could reasonably be segregated from the assets of the company. As of Dec. 31, 2012, there were 25 participants with account balances totaling $917,647.

Resolution: The department is asking the court to order the defendants to restore to the plan all losses, including interest or lost opportunity costs, which occurred as a result of their breaches of fiduciary duty; order the plan to set off the individual accounts of Smith against the amount of the losses, including interest or lost opportunity costs, which occurred as a result of his fiduciary breaches; appoint a successor fiduciary or administrator, at the defendants’ expense; and permanently enjoin the defendants from serving as fiduciary, administrator, officer, trustee, custodian, agent, employee representative, or having control over the assets of any employee benefit plan subject to the Employee Retirement Income Security Act of 1974. Additionally, the defendants are enjoined from engaging in any further action in violation of Title I of ERISA.

Docket Number: 3:14-cv-00716-FDW-DSC