Based on an investigation conducted by the Employee Benefits Security Administration (EBSA), the U.S. Secretary of Labor filed a civil complaint against Ditch Witch Equipment of Tennessee Inc., an underground utility construction equipment company, and Aubrey Needham, trustee of the company’s profit-sharing plan on April 29, 2014.
According to a Department of Labor (DOL) press release, the DOL alleged that Needham acted imprudently when he authorized the investment of plan assets, primarily on margin, in stock warrants and derivative securities without conducting any due diligence or consideration of the investments’ impact on the plan’s level of diversification, liquidity needs, or funding objectives. At various times between 2006 and 2009, the plan was 100% invested in stock warrants.
Through a consent order and judgment entered on July 6, 2017, the court ordered Needham to make restitution of $195,084 to the plan, to sell personal real estate in Blount County, Tennessee, to help achieve restitution to the plan, and appointed a successor fiduciary to distribute plan assets among the nonfiduciary participants and terminate the plan.
The order also enjoins Ditch Witch and Needham permanently from acting as a fiduciary, trustee, agent or representative in any capacity to any employee benefit plan as defined by the Employee Retirement Income Security Act of 1974 (ERISA).