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The
U.S. Department of Labor has entered into settlement agreements with
Aloha Airlines Inc., Bank of Hawaii and First Hawaiian Bank, which
agreed to pay $9,545,454 to the airline's three pension plans for
losses the plans suffered on investments in stock of the airline's
holding company. Both Aloha and its holding company are bankrupt. The
money will be paid to the Pension Benefit Guaranty Corp., the trustee
of the plans.
The Labor Department contended that Aloha and Bank
of Hawaii, as the plans' fiduciaries, breached their duties under the
Employee Retirement Income Security Act (ERISA). They allegedly caused
or permitted the plans to buy newly issued stock of the airline's
holding company in September 2000 for more than its fair market value
and without investigating the merits of the purchase for the plans, as
well as failed to take steps to protect the plans as the stock lost all
of its value.
In the department's view, the transaction also was
prohibited because there was no purchaser independent of the issuer.
Additionally, the department contended that First Hawaiian Bank, which
was an investment manager for a portion of the plans' investments not
involved in the transaction, facilitated the stock transaction and
therefore knowingly participated in the fiduciary breaches or violated
its duties as a co-fiduciary.
Under separate settlement
agreements, Aloha Airlines has agreed to pay a total of $5.5 million,
including $500,000 in civil penalties paid to the federal government.
The banks each agreed to pay $2.5 million, for a total of $4,545,454 in
restitution and $454,546 in civil penalties.
"We will vigorously
pursue plan fiduciaries who engage in transactions with employer
securities that are prohibited by ERISA," said Alan D. Lebowitz, deputy
assistant secretary for the Labor Department's Employee Benefits
Security Administration (EBSA).
In an earlier settlement
agreement, in September 2008, PriceWaterhouseCoopers LLP agreed to pay
$250,000 to the plans and a $50,000 civil penalty. The Labor Department
contended that PriceWaterhouseCoopers, the auditor for the plans and
the companies, knowingly participated in the fiduciary breaches.
The
settlements resulted from an investigation conducted by EBSA's Los
Angeles Regional Office. Employers and workers may contact that office
at 626-229-1000 or toll-free at 866-444-3272 for help with problems
relating to private sector pension and health plans. In fiscal year
2008, EBSA achieved monetary results of $1.2 billion related to
pension, 401(k), health and other benefits for millions of American
workers and their families. For information about ERISA enforcement,
visit http://www.dol.gov/ebsa/erisa_enforcement.html.
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