Federal judge appoints independent fiduciary to distribute Samoa Air assets
A federal judge in California has appointed an “independent fiduciary” to oversee the distribution of more than $200,000 in assets under the 401K Profit Sharing Plan of the now defunct locally based Samoa Aviation Inc., which was known as Samoa Air.
(This is not to be confused with Samoa Air, the pay-by-weight carrier now operating out of independent Samoa.)
The airline operated Manu’a flights as well as inter-Samoa flights for many years, but was sold by James and Connie Porter in November 2001 to the South Seas Group, and Andre Lavigne became the carrier’s Chief Executive Officer (CEO),.
Samoa Air stopped flying in September 2003 and by December the same year filed for Chapter 11 bankruptcy protection from creditors while undergoing reorganization, or so the company announced at the time.
A few months later, the company changed its base of operations to Newport Beach, Calif., and the case was converted to Chapter 7 bankruptcy, meaning the liquidation of any company assets, according to bankruptcy court documents.
It now appears that the only issue left is the company’s assets in the Samoa Aviation Inc. 401(k) Profit Sharing Plan in Pago Pago, according to federal records, which also state that the Plan had 53 participants and assets totaling $235,693, as of Nov. 30, 2012.
In April this year, the plaintiff— U.S. Labor Secretary Thomas Perez— filed a 10-page civil complaint with the federal court in Central California against defendants Samoa Aviation and Samoa Aviation 401(k) Profit Sharing Plan. Plaintiff asked the court for an enforcement action under the federal Employee Retirement Income Security Act of 1974 (ERISA).
Plaintiff alleges that Samoa Aviation was the administrator for the Plan, which was organized to provide retirement benefits to its participants, the employees of Samoa Aviation but the company failed to take steps to ensure the continued operation of the Plan, according to court documents.
“The Plan’s named fiduciaries and trustees cannot be located, leaving it without anyone to manage and control its assets,” Perez argued. “As a result, defendants are alleged to be in violation of various provisions of ERISA. Moreover, although the Plan holds $235,693.44 in assets for its 53 participants, its custodial asset trustee, Pershing, LLC, will not authorize distribution of any remaining Plan assets to participants and beneficiaries without direction from a properly-appointed fiduciary or a court-appointed independent fiduciary.”
Plaintiff sought removal of Samoa Aviation as plan administrator and fiduciary of the Plan, and requested that the court appoint an independent fiduciary. According to court documents, the defendants’ failure to appear in this action resulted in their default.
In a seven page decision issued late last month, U.S. District Court Judge Cormac J. Carney agreed with Perez that Samoa Aviation, as fiduciary for the Plan, violated three provisions of the ERISA.
For example, Samoa Aviation failed to act solely in the interest of the participants and beneficiaries of the Plan and for the exclusive purpose of providing benefits to participants and their beneficiaries and defraying reasonable expenses of Plan administration.
Additionally, Samoa Aviation “failed to act with the care, skill, prudence, and diligence required of a fiduciary” in accordance with provision of ERISA.
Perez requested the appointment of mainland based attorney Thomas A. Dillon, as the independent fiduciary to the Plan, saying that Dillon would be responsible for “marshaling, paying out, and administering all of the Plan’s assets and taking further action with respect to the Plan as appropriate, including terminating the Plan when all of its assets are distributed to all eligible participants and beneficiaries,” and would have a fiduciary responsibility to the Plan.
Perez recommends that Dillon receive up to $5,000 in reasonable fees and expenses, payable from the Plan’s assets.
In conclusion, Carney found that equitable remedy sought by the plaintiff, to remove Samoa Aviation from its position as plan administrator and named fiduciary of the Plan, and appoint in its place Dillon, is warranted. The Court further finds that the $5,000 fee proposal for Dillon’s service is reasonable.
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