IRS Attacks Many Business Owners with Huge Fines (412i, 419, captives, sect 79)

IRS Attacks Many Business Owners with Huge Fines (412i, 419, captives, sect 79)

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EBSA News Brief

U.S. Department of Labor Office of Public Affairs Philadelphia, Pa. Release Number: EBSA 12-123

For Immediate Release: November 28, 2012 Contact: Joanna Hawkins or Leni Uddyback-Fortson Phone: 215-861-5101 or 215-861-5102 E-mail: hawkins.joanna@dol.gov or uddyback-fortson.lenore@dol.gov

Solis v. John J. Koresko, V, et al., involving consent judgment against Farmers
& Merchants Trust Co. of Chambersburg

Date of Action: Nov. 27, 2012

Name(s) of Defendant(s): Farmers & Merchants Trust Co. of Chambersburg, successor by merger to Community Trust Co.

Allegations: In March 2009, the Secretary of Labor filed a lawsuit against multiple defendants, including Community Trust Company, formerly of Camp Hill, Pa., alleging violations of the Employee Retirement Income Security Act. The allegations were due to the defendants’ involvement with more than 100 prototype welfare plans known as the Regional Employers Assurance Leagues Voluntary Employees’ Beneficiary Association Trust, and later as the Single Employer Welfare Benefit Plan and Trust. Farmers & Merchants Trust Co. of Chambersburg,  successor by merger to CTC, served as the trustee of these welfare benefit plans until January 2010. With regard to this defendant, the Secretary’s complaint alleged that CTC breached its ERISA fiduciary duties as the directed trustee of the plans when it followed directions from the plans’ administrator, co-defendant Penn-Mont Benefit Services Inc., to transfer interest income out of the plans’ trust account on a monthly basis from April 2002 to December 2004 to one of the co-defendants, Penn Public Trust.  According to the Secretary’s allegations, those directions were not properly made in accordance with the terms of the plan documents and were contrary to ERISA.

Resolution: On Nov. 27, 2012, the United States District Court for the Eastern District of Pennsylvania approved and entered a consent judgment agreed to by F & M Trust and the Secretary resolving all the claims against CTC in the Secretary’s complaint.  Pursuant to the consent judgment, F & M Trust will pay $175,000 in settlement of the ERISA claims alleged by the Secretary against CTC, and a $17,500 penalty. Additionally, F & M Trust will relinquish $300,000 in funds it withheld following the issuance of the District Court’s Jan. 14, 2010, order which, among other things, discharged F & M Trust as trustee of the plans.  F & M Trust will also pay the aforementioned funds into the Registry of the Court, where they shall remain until further order of the court.

The Secretary will continue to litigate ERISA claims against the remaining defendants, which include John J. Koresko, V, Jeanne Bonney, Penn-Mont Benefit Service Inc., the Koresko Law Firm, P.C., Koresko and Associates, P.C., and Penn Public Trust.   Among other relief, the Secretary seeks restitution to the plans from these remaining defendants, removal of these defendants as plan fiduciaries and services providers and the appointment of new fiduciaries for the plans, and a full accounting of the plans’ finances and assets.

Court: United States District Court for the Eastern District of Pennsylvania

Docket Number: 2:09-cv-00988

U.S. Department of Labor materials are accessible at www.dol.gov.  The information above is available in large print, Braille, audio tape or disc from the COAST office upon request by calling 202-693-7828 or TTY 202-693-7755.