U. S. Labor Department Sues Miami Company and President to Recover $1.5 Million in Retirement Plan Assets

Thursday, February 8, 2007
The U.S. Department of Labor filed a lawsuit against Miami-based X-Ray Equipment Co. and its owner for misusing more than $1.5 million in retirement plan assets to benefit the company through improper loans from the profit sharing plan and retention of loan repayments paid by plan participants and third-party borrowers.

"Workers' retirement plans are not to be treated as cash machines for management's convenience," said U.S. Secretary of Labor Elaine L. Chao. "This legal action on behalf of the retirement plan's participants seeks to recover more than $1.5 million, ensure the plan's future integrity and prevent the defendants from ever again being in a position to plunder employee benefits."

The lawsuit alleges that X-Ray Equipment and its president, Colen Carter, violated the Employee Retirement Income Security Act (ERISA) between Sept. 30, 2000 and the present by failing to collect $1,156,800 in loans plus interest owed to the plan and by failing to forward to the plan $427,021 in loan payments made by participants and third-party borrowers. The loan repayments were co-mingled with the general assets of the company and used to pay company expenses.

The company and Carter, who was the plan trustee, also allegedly failed to prudently invest plan assets when they concentrated a majority of plan investments in notes and mortgages without investigating the financial soundness of such investments. These investments allegedly resulted in losses to the plan that impaired its ability to pay benefits when due. The suit seeks a court order to require that the defendants restore all losses with interest, permanently bar them from service to any plan covered by ERISA in the future and to appoint a new fiduciary to oversee the plan.

The suit, filed in the U. S. District for the Southern District of Florida in Miami, resulted from an investigation conducted by the district office in Miami of the Employee Benefits Security Administration (EBSA). In fiscal year 2006, EBSA achieved monetary results of $1.4 billion related to pension, 401(k), health and other benefits for millions of American workers and their families.
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