Judgment requires company president to restore losses to Kinetic Solutions ESOP Plan in White Bear Lake, Minnesota

Date of Action: Nov. 16, 2015

Type of Action: Consent Judgment

Name of Defendant: Paul Wax, Kinetic Solutions Inc. Employee Stock Ownership Plan

Allegations: An investigation by the U.S. Department of Labor's Employee Benefits Security Administration, Kansas City Regional Office, resulted in the department filing a suit in federal court alleging violations of the Employee Retirement Income Security Act.

The Kinetic Solutions Inc. Employee Stock Ownership Plan was established in 2004 by the White Bear Lake, Minnesota corporation and its president, Paul Wax. In December 2004, the ESOP purchased a $6 million life insurance policy from Penn Mutal Life Insurance Company on the life of Wax. In March 2008, Wax caused the ESOP to obtain a loan on the policy in the amount of $146,183.05 and deposited the funds into the ESOP account. Between March and May 2008, Wax transferred the amount of the loan from the ESOP account to Kinetic Solution's corporate account.

Kinetic Solutions was dissolved Aug. 1, 2012. The ESOP plan currently has 23 participants and assets of approximately $26,000.

Resolution: The parties reached a resolution prior to the Department filing the complaint. Therefore, contemporaneously with the filing of the complaint, the Department submitted a consent order and judgment on behalf of the parties for approval by the court.

Based on representations made by Wax, including the Chapter 7 Bankruptcy Petition he filed in Case No. 10-30171, his executed Declarations of Financial Status, and his 2012 and 2013 U.S. tax returns, which show that he is unable to pay the total restitution amount to the Plan, the consent judgment accepts $17,600 as full satisfaction for losses owed.

The court has enjoined Wax from engaging in any further action in violation of ERISA and serving as a fiduciary or service provider to any ERISA-covered plan.

Court: United States District Court for the District of Minnesota

Docket Number: 15-cv-03945

Employers and workers can reach EBSA toll-free at 866-444-3272 for help with problems related to private sector retirement and health plans. Additional information can be found at http://www.dol.gov/ebsa.