The opinion of the court was delivered by: Platt, District Judge.
This action arises under the Employee Retirement Income Act of 1974 ("ERISA") as amended 29 U.S.C. § 1001 et seq., and is brought by the Secretary of Labor, Elaine L. Chao (the "Secretary"), pursuant to ERISA §§ 502(a)(2) and (5), 29 U.S.C. § 1132(a)(2), (5), to obtain relief for alleged breaches of fiduciary duty under ERISA § 409, 29 U.S.C. § 1109.
Presently before this Court is the Secretary's motion for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. In their briefs, defendants do not contest that the money transfers at issue violated ERISA. Defendant John Hochuli, Jr. ("Hochuli") only opposes the requested equitable relief of restitution and an accounting. The Estate of Gustav Lengenfelder ("Lengenfelder") contends that it should not be held liable as a fiduciary or co-fiduciary of the pension plan and also opposes the remedy of restitution.
For the reasons set forth below, the Secretary's Motion is granted. Defendants are jointly and severally liable for and shall pay the sum of $480,000 plus prejudgment interest. Defendant Hochuli is permanently enjoined from further service as a fiduciary or service provider to any employee benefit plan and is ordered to provide an accounting of plan assets.
The Diamond Manufacturing Corporation Profit Sharing Plan (the "Plan") was an employee benefit plan established to provide benefits to employees of the Diamond Manufacturing Corporation (the "Corporation"). According to Plan documents, Hochuli and Lengenfelder were the trustees of the Plan. (Pl. 56.1 Stmt. ¶¶ 4, 5.) Hochuli and Lengenfelder were also each 50% owners and officers of the Corporation. (Pl. 56.1 Stmt. ¶¶ 6, 7.) Hochuli does not dispute that he was a fiduciary of the Plan.
Between December 26, 1991, and June 29, 1993, $480,000 was transferred from the Plan to the Corporation. According to promissory notes executed by the defendants, the transfers were documented as unsecured loans. (Pl. 56.1 Stmt., Exs. GN.) The Secretary contends that the transfers were used to pay back a bank loan owed by the corporation. Hochuli contends that the money was used to pay the customary and ordinary expenses of the Corporation, including the salaries of the Plan participants.
Lengenfelder has stipulated, through counsel, that his signature is present on seven of the eleven checks, which amounted to $255, 000. (Pl. 56.1 Stmt., Ex. 0.) Lengenfelder further agrees that the transfers were prohibited transactions under ERISA. (Illmensee Decl. ¶ 5.) The Corporation is now defunct and has no assets.
Hochuli has submitted a letter dated September 14, 1998, in which he states that he is resigning as a trustee of the Plan. (Hochuli 56.1 Stmt., Ex. C.)
On March 10, 1999, Hochuli moved this Court for a protective order to prevent being compelled to testify based on the Fifth Amendment privilege. Magistrate Judge Vicktor Pohorelsky denied Hochuli's motion, but ruled that Hochuli could assert his Fifth Amendment privilege in response to specific questions that might tend to incriminate him.
Lengenfelder died on July, 7, 2001. The Estate of Lengenfelder argued that it should not be substituted for Mr. Lengenfelder due to defective service of process. On April 17, 2002, Magistrate Judge Wall issued a Report and Recommendation stating that the Estate of Lengenfelder had waived any defense based on defective service. This recommendation was adopted as an Order of this Court on June 24, 2002, and the Estate of Lengenfelder was substituted as a defendant in this action.
The Secretary now brings this Motion. The Motion seeks an Order of this Court ordering restitution to restore with appropriate interest the monies taken from the Plan. The Secretary further requests the equitable relief of an accounting and an injunction barring Hochuli from serving as a fiduciary or service in any ERISA plan.
Lengenfelder's Estate argues that it should not be held liable as a fiduciary or co-fiduciary of the Plan since Lengenfelder did not actively participate in the management of the Plan. Due to Lengenfelder's recent death, the only form of relief available to the Secretary is restitution.
Hochuli does not oppose the Secretary's request for an injunction barring him from an ERISA Plan fiduciary and has already stated that he has already resigned his position as a fiduciary of the Plan by letter dated September 14, 1998. Hochuli does contest the accounting to the extent it requires him to give testimony or make statements on the grounds that he has already turned over every document in his possession and that he should not be compelled to testify because it would violate his Fifth Amendment ...