US Labor Department secures consent judgment appointing independent fiduciary for defunct lumber company in Chester County, Pennsylvania

Date of Action: April 20, 2015

Name(s) of Defendants: Stephen Scott Danby, Jr.; Danby Lumber and Millwork Company, Inc.; Danby Lumber and Millwork Company, Inc. 401(k) Profit Sharing Plan

Allegations: Based on an investigation conducted by the U.S Department of Labor’s Employee Benefit Security Administration, the Secretary of Labor filed a complaint on May 22, 2014 in U.S. District Court for the Eastern District of Pennsylvania against the defendants.  The complaint alleged multiple violations of the Employee Retirement Income Security of 1974 in the operation of a company sponsored 401(k) retirement plan from December 2007 through the date of the filing. The complaint sought the removal of the plan’s fiduciaries; a permanent injunction barring the fiduciaries from serving in this capacity in the future; the appointment of an independent fiduciary to be paid by the defendants; the disgorgement of all monies received by the defendants caused by their fiduciary misconduct; the use of Danby’s individual plan account balance to off-set losses caused to the plan resulting from his fiduciary misconduct; and, the defendants cooperation with the investigation.

Resolution: On April 20, 2015, the court approved a consent judgment permanently removing Danby as the administrator of the plan; permanently enjoining the defendants from serving in a similar capacity for any other ERISA-covered plan; appointing Lefoldt & Company of Ridgeland, Mississippi as the independent fiduciary to the plan; recognizing the restitution of $100,000 restored to the plan by Danby; recognizing a deduction of $246,883 from Danby’s individual account balance in the plan to further restore assets to other plan participants; recognizing that Danby will not be entitled to a distribution from the plan until every other plan participant is made whole as determined by Lefoldt; providing Lefoldt with full discretionary authority over real property owned by the plan; and, imposing a mandatory penalty against the defendants.  Danby and the company also agreed not to contest this judgment in any future bankruptcy filing and agreed that the debt to the plan would be considered non-dischargeable in any future bankruptcy proceeding.

Court: United States District Court for the Eastern District of Pennsylvania

Docket Number: 2:14-cv-02920-JHS

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