By Cyril Tuohy
The U.S. Department of Labor (DOL) has sued six trustees and financial advisors in connection with the misappropriation of $4.9 million from two defined benefit plans belonging to an Iowa foundry and a Michigan manufacturer.
The suit, filed after an investigation by the department’s Employee Benefits Security Administration, alleges misuse of the funds from Fairfield Castings and Fourslides Inc. pension plans, in violation of the Employee Retirement Income Security Act (ERISA), the DOL said.
“Those entrusted with managing these pension funds have shown an utter disregard for the workers, who are relying on the money being there for them when they retire,” Phyllis C. Borzi, the assistant secretary of labor who heads the Employee Benefits Security Administration, said in a statement. "Our aim is to make this right for those workers."
The lawsuits name George S. Hofmeister, trustee of the Revstone Casting Fairfield GMP Local 359 pension plan and the Fourslides plan; Robert La Courciere and Pamela Babbish, former trustees to Fourslides' pension plan, and Bernard Tew, managing director of Bluegrass Investment Management, the advisor to Revstone Casting Fairfield and Fourslides plans.
The suit also names Fairfield Casting (formerly Revstone Casting Fairfield) and Fourslides, as well as Nelson Clemmons and William Tweardy, members of the investment committee for the Revstone Casting Fairfield plan, the DOL said.
DOL investigators allege that Fairfield Castings dipped into the fund only days after taking control of the plan’s former sponsor, Dexter Foudry, in December 2010, while trustees raided the Fourslides plan over a three-year period ending in 2009 to fund an unauthorized loan.
Hofmeister is listed as chairman and LaCourciere as vice president and sales of marketing for Revstone Industries, which manufactures components for the transportation industries. Attempts to reach Hofmeister and LaCourciere were unsuccessful and a message left with Fourslides was not returned.
Pension money was used to buy and lease company property, for illegal asset transfers, as payment for “excessive fees” and for keeping participants of the plan in the dark about plan assets, the DOL said. DOL investigators are asking the court to restore any plan losses.
The DOL is also looking to bar the defendants from serving as fiduciaries or service providers in the future to any plan covered by ERISA, remove them as plan fiduciaries, and independent fiduciary for the plans.
The legal action comes at a time when the DOL is looking to expand the fiduciary standards governing financial advisors.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].
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