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Boston, Massachusetts - Raymond Paolo, trustee
of the Log On America Inc.’s 401(k) plan, has agreed to restore $12,664
to settle a U.S. Department of Labor lawsuit alleging violations of the
Employee Retirement Income Security Act (ERISA). The Providence, Rhode
Island-based company filed for bankruptcy in summer 2002 and went into
liquidation around the end of that year.
In a consent judgment and order, filed simultaneously
with the department’s suit in the U.S. District Court for the District
of Rhode Island, Paolo agreed to restore the money from his own account to
compensate the other participants of the 401(k) plan.
According to James Benages, Boston regional director of
the Labor Department’s Employee Benefits Security Administration (EBSA),
the suit alleged that Paolo had breached his fiduciary duty by failing to
make sure that employee contributions to the 401(k) plan were forwarded to
the plan during the period January 1, 2000 through December 31, 2002.
Instead, contributions withheld from employees’ paychecks were used by
the company for other purposes.
“It is a clear requirement of the law,” said
Benages, “that plan assets, including all employee paycheck withholding
contributions, must be used and invested only for the benefit of the plan’s
participants and beneficiaries. Any other use is strictly prohibited by
ERISA.”
The consent judgment and order also permanently
prohibits Paolo from future violations of ERISA and from serving as a
trustee or administrator of any other ERISA-covered employee benefit plan
in the future. He must make restitution to the plan within 20 days of the
signing of the order, distribute the plan’s assets to participants and
beneficiaries within 40 days, and properly terminate the plan.
In fiscal year 2004, EBSA achieved record monetary
results of $3.1 billion related to pension, 401(k), health and other
benefits of millions of American workers and their families. EBSA’s
Boston regional office, which investigated the case, can be reached at
617.565.9600. Help with problems relating to private-sector retirement and
health plans can also be obtained by calling EBSA’s toll free number at
1.866.444.EBSA (3272).
(Chao v Raymond Paolo)
Civil Action No. 05-344-T |
