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Release Date: 06/07/2001
Release Number: 081
Contact Name: John M. Chavez
Phone Number: 617.565.2075
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Boston, Massachusetts - The owner of a now
defunct Dorchester-based cardboard box manufacturing company has agreed to
restore $650,000 to the pension and profit sharing plans set up for the
benefit of his company’s employees as the result of a June 1, 2001
consent judgment and order issued by the U.S. District Court for
Massachusetts to settle a lawsuit filed by the U.S. Department of Labor. |
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While neither admitting nor denying the allegations in
the Labor Department’s lawsuit, Harold J. Cohen, owner of Maxwell
Products Corporation of 65 East Cottage St., Dorchester, Massachusetts,
has agreed to restore the funds to the Maxwell Products Corporation Profit
Sharing Plan and the Maxwell Products Corporation Pension Plan, and to
forfeit his own financial interests in the plans. The company ceased
operations on or about December 31, 1993. |
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In its suit, filed July 13, 2000, the Labor Department
charged Cohen and his company with violations of the Employee Retirement
Income Security Act, the federal law that protects private employee
pension and welfare benefit plans. During the period covered by the
lawsuit – June 1, 1988 through October 2, 1992 – the company employed
24 workers, 23 of whom were participants in the pension plan, while 16
were participants in the profit sharing plan. |
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The suit alleged that Cohen, acting as a trustee of the
plans, and his company, as sponsor of the plans, caused the pension and
profit sharing plans to loan, without security or proper documentation, a
total of approximately $1,203,582 in plan assets to Maxwell Products
Corporation and/or Harold J. Cohen. The suit further alleged that neither
the principal nor the interest on these loans were ever repaid. At the
time, the total loan amount represented over 90 percent of the combined
total assets of the plans. |
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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 specifically prohibits those in control of plan
assets, such as trustees and plan sponsors, from dealing with those assets
for their own benefit. |
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The consent judgment, signed by U.S. District Judge
Nancy Gertner, resolves the Labor Department suit in the following ways:
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It requires Harold J. Cohen and
Maxwell Products Corporation to restore to the plans the amount of
$650,000 plus post-judgment interest on the outstanding balance
according to a set payment plan.
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It requires Harold J. Cohen to waive
receiving any personal benefit payments from either of the plans.
Since his personal interests in both plans were substantial, the
amounts forfeited by Cohen make up the difference between the $650,000
to be paid and the total amount of the improper loans plus appropriate
interest.
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It requires Cohen to provide the
plans with a security interest in the company property located in
Dorchester, Massachusetts, until the funds are repaid.
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Cohen and his company are
permanently enjoined from future violations of ERISA.
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Cohen is permanently enjoined from
serving in any position of responsibility with regard to an ERISA-covered
plan, and must appoint an independent successor trustee for his
company’s plans.
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Once the final payment is made,
Cohen and his company must terminate the plans and insure that all
non-trustee participants receive full distribution of their plan
account balances.
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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. Harold J. Cohen, et al
Civil Action No. 00-11372-NG) |
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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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