The U.S. Department of Labor alleged violations of the Employee Retirement Income Security Act. According to a news release, plan trustee Douglas A. Nidiffer and former company officer Rex Scoggins made a series of loans and extensions of credits totaling $2,185,000 from the plan to Gregg W. Boice between November 3, 1998, and January 2001, to develop Rogue Landing, a proposed resort on the Rogue River in Gold Beach, Oregon. Boice defaulted on his plan loans on several occasions. On March 31, 2003, the Rogue Landing property was transferred to the plan in lieu of foreclosure on the property. The plan then assumed the costs of ownership of the property.
The DoL said the plan entered into an agreement with the owners of property adjacent to Rogue Landing to serve as consultants on the development and management of the resort property, and that it granted a right of first refusal option to another party to buy the Riverview Restaurant located on the resort property. Both of those actions were imprudent, according to the regulator.
In addition, the department alleged that the plan trustee approved a $40,000 loan from the plan to purchase a convenience store and gas station known as the John Day Market near Astoria, Oregon. John Day Market was found to be contaminated by leaking underground fuel tanks, making the property unsellable. When the borrower defaulted on the loan, the plan foreclosed on the property, making the plan responsible for the costs of environmental cleanup.
The Labor Department negotiated a consent judgment with the company prior to filing its lawsuit. In addition to the restitution, the settlement directs the sale of the plan-owned properties. Under the settlement, the 401(k) plan will recover no less than $4.5 million from any sale of the Rogue Landing property.Nidiffer also agreed to resign as a trustee to the 401(k) plan.