The U.S. Department of Labor has sued Elk Valley Professional Affiliates, Inc.
(EVPA) of Fayetteville, Tenn., and its former corporate executives for "imprudently
using" $1,075,892.42 of the assets of the employee stock ownership plan
to purchase company stock at prices in excess of fair market value and to pay
expenses related to the sale of the company.
“Trustees of employee pension and benefit plans must realize that the law
requires them to deal with plan assets in a careful and prudent manner,”
said Howard Marsh, director of the Atlanta regional office of the Employee Benefits
Security Administration (EBSA), which investigated the case.
The suit, filed April 18, alleges that former EVPA president Mark Waters and
former plan fiduciary David Groce violated the Employee Retirement Income Security
Act (ERISA) by using $980,034 in plan assets to purchase EVPA stock between
November 1995 and May 1996. Waters and Groce both served on the ESOP’s
administrative committee. The suit also alleges that the fiduciaries improperly
secured an ESOP loan with a $553,500 Certificate of Deposit owned by the plan
and improperly used the CD to pay off the loan. The fiduciaries allegedly used
plan assets to pay $95,498.42 in closing expenses to Telesis, a broker Waters
hired to find a buyer for EVPA, and failed to maintain a fidelity bond to protect
the plan against losses as required by law.
EVPA, which was purchased by Deaconess HomeCare, Inc. in December 1996, operates
home health care agencies and home medical equipment facilities in Tennessee,
northern Alabama and Mississippi. The suit seeks to permanently bar Waters and
Groce from serving as fiduciaries or service providers to plans subject to ERISA,
and require them to restore to the plan all losses with interest resulting from
their improper actions.
Employers with similar problems, who are not yet the subject of an investigation,
may be eligible to participate in the department’s Voluntary Fiduciary
Correction Program (VFCP). Participation in the VFCP requires employers to make
workers whole but allows them to avoid EBSA enforcement actions and civil penalties
as well as applicable excise taxes. For information about the VFCP see www.dol.gov/ebsa.
The suit was filed in federal district court in Winchester. Employers and workers
can reach EBSA’s Atlanta regional office at 404.562.2156 or through its
toll-free number, 1.866.444.EBSA (3272), for help with problems relating to
private-sector pension and health plans.
Chao v. Elk Valley Professional Affiliates, Inc.
Civil Action No. 4:03-CV-17
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