Bankrupt 401(k) Fiduciary Must Still Restore Losses to Plan

The DOL obtained a court order requiring the fiduciary of William Bowman and Associates Inc.401(k) plan to continue making installment payments for plan losses due to a fiduciary breach.

The U.S. Department of Labor (DOL) has obtained a consent order and judgment requiring a 401(k) plan fiduciary to continue to restore losses to the plan he agreed to in a previous court order.

According to the DOL, William Bowman and Associates Inc., a land improvement company based in West Berlin, New Jersey, sponsored the William Bowman Associates Inc. profit sharing 401(k) plan for its employees. William P. Bowman was the president and sole shareholder of the company and the sole trustee of the plan with authority over investment decisions for the plan.

The company filed for bankruptcy in 2007 and ceased operations in 2009. An investigation conducted by the DOL’s Employee Benefits Security Administration (EBSA) found several violations of the Employee Retirement Income Security Act (ERISA) by Bowman, who used his position to make a series of unsecured loans totaling $188,325.06 to related parties. These loans were never repaid, resulting in losses to the plan and its participants.

On April 23, 2013, based on an earlier complaint involving the plan and filed by the Secretary of Labor, Bowman entered into a consent judgment resolving the earlier complaint and was ordered by the court to restore $188,325.06 to the plan through a series of 126 monthly installment payments. Subsequently, Bowman filed for bankruptcy. Restorative payments totaling $49,500 have been made to the plan. There is a remaining debt of $138,825.06 Bowman owes to the plan.

A new court order says Bowman admits that, because his debt obligation to the plan arose from a defalcation he committed while he was acting in a fiduciary capacity, the debt is non-dischargeable under the Bankruptcy Code.

The Secretary of Labor entered into a new consent judgment with William Bowman, which resolves all of the allegations in the complaint that was previously filed. Bowman agreed to make restitution to the plan as previously stipulated in the first Consent Judgment.