Compliance July 11, 2007

DoL Sues Firm for Improperly Using Loan Repayments

July 11, 2007 (PLANSPONSOR.com) - The U.S. Department of Labor (DoL) has obtained a default court judgment providing restitution of $1,154,848.25 plus interest to the profit-sharing retirement plan of Miami-based X-Ray Equipment Co.
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A DoL news release said its lawsuit alleged that from September 30, 2000, X-Ray Equipment and its president, Colen Carter, violated the Employee Retirement Income Security Act (ERISA) by failing to collect outstanding loans and interest owed to the plan, and failing to forward to the plan loan payments made by participants and third-party borrowers. The loan payments were co-mingled with the general assets of the company and used to pay company expenses, the DoL said.

X-Ray Equipment and Carter, who was the plan trustee, also allegedly failed to prudently invest plan assets by concentrating a majority of the investments in notes and mortgages without investigating the financial soundness of the investments. These investment decisions allegedly resulted in losses to the plan that caused it to be unable to pay benefits when due.

In addition to the order for restitution, the court removed the company as a plan fiduciary and appointed an independent fiduciary to oversee the plan.

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