Opinion ID: 217197
Heading Depth: 3
Heading Rank: 2

Heading: Missing Remittances to the Plan Account

Text: In 1999, Lunde Electric began experiencing financial difficulties and was unable to pay its operating expenses with revenues. The government alleged that, as a result of these financial problems, the Eriksens caused the Company to stop remitting elective deferrals to the Plan. Brad Sommerfeld regularly reviewed the Trust's brokerage statements as part of his responsibilities as Plan accountant. Those statements reflected deposits into and withdrawals from the Plan Account. Sommerfeld noticed that regular deposits into the Plan Account were no longer made after October 1999. Indeed, the only deposit made to the Plan Account for the 2000 Plan Year was for $10,000, on December 27, 2000. Although money continued to be withheld from Participants' paychecks, no deposits were made into the Plan Account in 2001, in 2002, or from January through March 2003. From 1999 to 2002, Lunde Electric employed three different bookkeepersCynthia Halcomb (mid-1990s to 1999), Brad Mansker (May 2000 to December 2000), and Toni Wunsch (December 2000 to 2003). Both Halcomb and Mansker testified that they would meet with the Eriksens on a regular basis to decide which bills to pay. According to Mansker, within a few months of his starting work at the Company, he learned that elective deferrals were not being remitted to the Plan. Mansker testified that he raised the issue of the outstanding liability on several occasions, but that the Eriksens did not direct the Company to make payments to the Plan during his tenure. Moreover, starting in 1999, employees' elective deferrals were shown as Receivables on the Plan's balance sheet and reflected as a liability on Lunde Electric's books. From 1999 to December 2002, the Plan Account's Receivables grew from $35,156.62 to $97,374.68. By 2003, the Receivables had increased to $103,606; from 1999 to 2003, the Receivables ballooned from 1.47% of the Plan's assets to 15.01%. On December 5, 2001, the Eriksens participated in a conference call with attorney Ronald Braley. Defendants asked Braley about the consequences of not funding 401(k) trust accounts. Braley informed the Eriksens that they could be personally liable as fiduciaries and, in his own words, informed them that while the Department of Labor usually does not take a keen interest in plans with fewer than 100, if an employee knew about it and complained to the Department of Labor, that an investigation may open up and they would have a more serious issue. During the conference call, Braley emphasized that the Eriksens had to pay the unfunded liability as soon as possible. Thereafter, Braley memorialized the conversation in an email that reads, in part: Apparently, for the past year and one half, they have failed to contribute to the 401(k) . . . Plan after taking elective deferrals from employees. On May 2, 2002, Brad Sommerfeld wrote to bookkeeper Toni Wunsch concerning the Company's accounting: As you know the Company is significantly behind in depositing its 401K contributions. This is a huge problem because most of the money comes from employees' paychecks and the Officers of the Company and Trustees of the Plan have a fiduciary responsibility to deposit these funds timely (deposits are due monthly). This is possibly the worst liability to fall behind on in terms of legal and tax problems. Sommerfeld testified that he also had a conversation with Sigmund about the Plan's delinquency and that Sigmund stated, We're doing the best we can.