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Release Date: 05/03/2001
Release Number: 052
Contact Name: John M. Chavez
Phone Number: 617.565.2075
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Boston, Massachusetts - Three owners of a
Woburn-based aerospace parts manufacturing company will repay over
$100,000 to the company’s 401(k) profit sharing plan to settle a lawsuit
filed by the U.S. Department of Labor, according to an April 17, 2001
consent judgement in the U.S. District Court for Massachusetts. |
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In its suit filed April 12, the Labor Department
charged Salvatore Colucciello, Ralph Colucciello and William Nunnelley
(a/k/a Edward Nunnelley), owners of LKM Industries of 44 Sixth Rd.,
Woburn, with violating the Employee Retirement Income Security Act (ERISA).
During the period covered by the lawsuit, October 1993 to the present, LKM
employed over 200 workers. Most were participants in the 401(k) plan.
Currently in bankruptcy, the company now employs fewer than six workers. |
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The suit alleged the defendants caused the 401(k) plan
and a defined-benefit plan also under their control to make $950,000 in
unsecured loans in 1993 to Lock Realty Trust, a business in which each of
the defendants owned a 25 percent interest. Then, it was alleged, through
a series of questionable financial maneuvers involving several other
parties, the defendants managed to repay the loans to the plans, but left
unpaid $82,000 in accrued interest. |
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Although LKM was supposed to repay the interest in
weekly payments beginning February 24, 1998, no payments were received
since October 1999, and on April 13, 2000, LKM filed for Chapter 11
Bankruptcy relief. As of January 23, 2001, the outstanding balance on the
interest debt was $76,517.38. |
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The department’s lawsuit noted the three defendants
and LRT were all parties in interest (related parties) with respect
to the employee benefit plans. Each owned more than ten percent of LKM and
served as a trustee of the company’s 401(k) plan and the Locke
Manufacturing Co., Inc. Defined Benefit Plan, an employee benefit plan in
which the defendants were the only participants. |
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The department’s suit further alleged that the
defendants caused the 401(k) plan to make unsecured loans to participants,
including themselves and their relatives, totaling over $216,000. In June
1999, the defendants also allegedly allowed the transfer of $50,949 from
the 401(k) plan to the defined benefit plan. |
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ERISA requires that employee benefit plan assets be
used and invested solely for the benefit of the plan’s participants,
according to James Benages, regional director in Boston for the Labor
Department’s Pension and Welfare Benefits Administration, which
administers ERISA. The law prohibits the use of plan assets for the
benefit of any party in interest. |
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The department’s suit charged that all of the alleged
actions by the defendants consisted of the use of plan assets for the
benefit of parties in interest with respect to the plans, including
dealing with the assets of the plans in their own interest and for their
own account. |
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The consent judgement, signed by U.S. District Judge
Douglas P. Woodlock, resolved the Labor Department’s suit, with the
defendants’ agreement to entry of the judgment while neither admitting
nor denying the allegations. The order permanently enjoins them from
future violations of ERISA, and prohibits them serving as fiduciaries to
any ERISA-covered plan for 10 years. |
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No later than May 15, 2001, each of the three
defendants must repay to the 401(k) plan $26,033.49, for a total of
$78,100.47. The order also directs the 401(k) plan to deduct from
the individual plan accounts of Salvatore Colucciello, Ralph Colucciello,
and Mario Colucciello the outstanding amounts due on their respective
participant loans. Mario Colucciello is the son of Ralph Colucciello. |
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Finally, no later than May 15, 2001, the amount of
$50,949 (plus interest) which had been transferred into a suspense account
by the defendants in June 1999, must be allocated to the accounts of all
individuals who were participants of the 401(k) plan as of June 30, 1999. |
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The Labor Department’s legal action followed an
investigation by the Boston Regional Office of the Pension and Welfare
Benefits Administration. That office is located in Room 575 of the
John F. Kennedy Federal Building in Boston. The telephone number is 617.565.9600. |
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(Chao v. Salvatore Colucciello, et al
Civil Action No. 01-CV10614-DPW) |
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U.S. Department of Labor
news releases are accessible on the Internet. The information in this news
release will be made available in alternate format upon request (large
print, Braille, audio tape or disc) from the Central Office for Assistive
Services and Technology. Please specify which news release when placing
your request. Call 202.693.7773 or TTY 202.693.7775. |
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