U.S. Bankruptcy Judge Jack B. Schmetterer of the U.S. Bankruptcy Court for the Northern District of Illinois noted in his opinion that a discharge under section 727 of the Bankruptcy Code “does not discharge an individual debtor from any debt … for fraud or defalcation while acting in a fiduciary capacity…” The court found that John Dombek III, president and part owner of Wisconsin Tool and Stamping Company and future related entities, failed to remit contributions to employees’ 401(k) plan and to employees’ group health plan insurer or failed to timely remit the contributions, which constitutes a defalcation by Dombek while acting as an ERISA fiduciary.
Schmetterer determined that Dombek was a functional fiduciary to the plans because he exercised discretionary authority and control over the plans by retaining employee contributions to the plans and controlling the companies’ corporate accounts. Evidence brought by the Department of Labor (DOL) showed Dombek failed to remit the contributions in accordance with regulations.
The court concluded that the $67,217.74 in unremitted and untimely remitted withheld employee contributions and associated lost opportunity costs is non-dischargeable under the Bankruptcy Code.The decision in Dombek v. Solis is here.
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