UNITED STATES DISTRICT COURT EASTERN DISTRICT OF CALIFORNIA FRESNO DIVISION
October 16, 2012
HILDA L. SOLIS, SECRETARY OF LABOR, UNITED STATES DEPARTMENT OF LABOR, PLAINTIFF,
ELECOM, INC., JESSE MEJORADO, AND CONTRACTORS AND EMPLOYEES 401(K) PLAN AS ADOPTED BY ELECOM, INC.,
CONSENT JUDGMENT AND ORDER
Plaintiff Hilda L. Solis, Secretary of Labor, United States Department of Labor ("the Secretary"), pursuant to her authority under sections 502(a)(2) and (5) of the Employee 22 21 Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. §§ 1132(a)(2) and (5), has filed a 23 Complaint against ELECOM, INC. ("Elecom"), JESSE MEJORADO ("Mejorado"), 24 individually, and the CONTRACTORS AND EMPLOYEES 401(K) PLAN (the "Plan"), an 25 employee benefit plan within the meaning of section 3(3) of ERISA, 29 U.S.C. § 1002(3). 26
A. The Secretary, Elecom, Mejorado and the Plan (collectively, the "parties") admit 27 that the Court has jurisdiction over this action pursuant to ERISA Section 502(e)(1), 29 U.S.C. § 1132(e)(1), and that venue lies in the Eastern District of California pursuant to ERISA 2 Section 502(e)(2), 29 U.S.C. § 1132(e)(2). 3
B. Defendants Elecom, Mejorado and the Plan (collectively "Defendants") waive 4 filing of an Answer and further waive entering any affirmative defense, counterclaim, or third-5 party complaint, or any other defenses that they may have in this case. 6
C. The parties agree to the entry of this Consent Judgment and Order. The parties 7 further agree that this Consent Judgment and Order shall fully settle all claims of the Secretary 8 asserted in the Complaint filed in this matter. 9
D. All parties expressly waive Findings of Fact and Conclusions of Law.
IT IS HEREBY ORDERED, ADJUDGED, and DECREED that:
1. Defendants Elecom and Mejorado are jointly and severally liable for $16,435.87*fn1 in losses plus lost-opportunity costs caused to the Plan ("Loss Amount"), and judgment is hereby 13 entered against them in that amount.*fn2 14
2. Defendant Mejorado is permanently enjoined and restrained from violating the 15 provisions of Title I of ERISA, 29 U.S.C. §§ 1001-1191c. 16
3. Defendant Elecom is hereby removed as Plan Administrator and fiduciary of the Plan. 18
4. Defendant Mejorado is hereby removed as a fiduciary of the Plan, subject to the 19 exceptions set forth in Paragraphs 5, 6, 15 and 16, infra. 20
5. Defendant Mejorado shall remain a fiduciary of the Plan solely for the purpose of 21 restoring losses to the Plan, making or causing the distributions of the assets of the Plan and 22 subsequent termination of the Plan, in accordance with the instructions set forth below in 23 Paragraphs 15 and 16. After Mejorado fulfills the duties set forth in Paragraphs 15 and 16, infra, 24 he shall immediately be removed from his position as a fiduciary of the Plan. 25
6. Defendant Mejorado is permanently enjoined and restrained from future service 26 as a fiduciary of, or service provider to, any ERISA-covered employee benefit plan, subject to 27 the exceptions set forth in Paragraphs 5, 15 and 16 herein. 2
7. Based on the representations made by Defendant Mejorado, including those made 3 by him in his personal bankruptcy case (Case No. 10-11876-A-7) regarding his ability to pay, the 4 Secretary declines to seek collection of the Loss Amount at this time. The Secretary reserves the 5 right to bring a collection action against Defendant Mejorado for the full Loss Amount at any 6 time. Prior to initiating a collection action, the Secretary shall send Defendant Mejorado a 7 written demand letter ("Secretary's Demand Letter") to the last home address that he provided to 8 the Secretary. Within fifteen (15) calendar days of receiving the Secretary's Demand Letter, 9 Defendant Mejorado shall provide the Secretary with financial documents including, but not 10 limited to, tax returns (for the three most recent years), bank statements, investment statements, 11 and other similar financial statements relevant to Defendant Mejorado's ability to restore the 12 Plan's losses. 13
8. Defendant Mejorado expressly agrees that the Secretary has the right, on an 14 annual basis, to review his financial condition for the next five (5) calendar years.following the 15 entry of this Consent Judgment. Should the Secretary elect this right, the Secretary will notify 16 Defendant Mejorado of this demand in writing at the last home address provided to the 17 Secretary. Defendant Mejorado affirms that, at time of this Consent Judgment and Order's 18 execution, such address is: 5297 West Osprey Way, Fresno, CA 93722. Within fifteen (15) 19 business days of the date of Secretary's written demand, Defendant Mejorado shall provide to 20 the Secretary the following documents: 21
a. Payroll wage statements for Defendant Mejorado for the last four (4) pay periods;
b. True and accurate copies of state and federal tax returns filed in that year 23 with all attachments and any requests for extensions; and
c. A notarized declaration, made under penalty of perjury, detailing 25 Defendant Mejorado's financial condition, including, but not limited to, any newly-acquired real or personal property, capital gains, gifts and inheritances, life insurance benefits, lottery winnings and gambling income, financial securities, precious commodities, and non-cash gifts and winnings.
9. In addition, for the next five (5) years following entry of this Consent Judgment 4 and Order, Defendant Mejorado agrees that, to the extent that his gross household income and 5 other earnings as defined in Paragraph 10, infra, exceed $100,000.00 (one hundred thousand 6 dollars) in any twelve-month period, Defendant Mejorado shall commence making twelve 7 payments to the Plan: 11 (eleven) monthly payments of $1,170.77 ("Principal Payments") 8 representing the Loss Amount and 1 (one) final balloon payment representing accrued interest 9 ("Interest Payment"), as defined infra. The Principal Payments and Interest Payment are due to 10 the Plan on the first day of the month following the month in which Defendant Mejorado meets 11 or exceeds the gross income and other earnings threshold described herein. 12
a. For the purposes of this Consent Judgment and Order and Paragraph 9, supra, gross household income and other earnings shall include, but are 13 not limited to, wages, capital gains, gifts and inheritances, life or other 14 insurance benefits, lottery winnings, and gambling income, as well as 15 assets that can be readily liquidated into cash on demand without a 16 significant loss in value, including equity in real estate and/or personal 17 property, financial securities, precious commodities, and non-cash gifts 18 and winnings.
b. The "Interest Payment" for the accrued lost interest earnings on the Loss 21 Amount shall be determined by the Secretary upon completion of the 22 eleventh (11th) and final Principal Payment and the Secretary shall 23 provide Defendant Mejorado notice of same at the last home address 24 provided to the Secretary. The Interest Payment shall be calculated by 25 applying to the Loss Amount the underpayment rate described in 26 26 U.S.C. § 6621 from the date this Court enters this Consent Judgment and Order until such time as Defendant Mejorado makes the final Principal Payment.
c. The Principal Payments and the Interest Payment shall be allocated on a 4 pro rata basis to the Participants who have suffered monetary losses as a 5 result of Defendant Mejorado's fiduciary breaches ("Affected 6 Participants"). For the purposes of this Consent Judgment and Order, pro 7 rata shall mean a percentage -- the numerator shall be the amount of 8 outstanding employee contributions or prevailing wage employer 9 contributions attributable to an Affected Participant, and the denominator 10 shall be the Loss Amount.
d. The Principal Payments and the Interest Payment shall be payable by 12 check or money order, along with an allocation schedule, to: Contractors and Employees Retirement Trust, Group #K3554 Elecom, Inc. 13 Fringe Benefit Group -- Plan Benefit Services, Inc. ATTN: Accounting Department 11910 Volente Road 14 15 Austin, TX 78726 1-800-662-6177
10. Should Defendant Mejorado meet the income threshold set forth in Paragraph 9, 18 supra, but fail to take action as described in Paragraph 9, supra, the Secretary, by appropriate 19 motion, may reopen her case against Defendant Mejorado and seek restitution to the full extent 20 of his liability to the Plan. Further, Defendant Mejorado shall be removed as the Plan's fiduciary 21 and, upon motion by the Secretary, an Independent Fiduciary shall be appointed by this Court to 22 administer the Plan. In such case, Defendant Mejorado accepts liability for all fees and expenses 23 incurred by the Independent Fiduciary in connection with the administration of the Plan. 24
11. Should Defendant Mejorado change his home address or telephone number at any 25 time within five (5) years from the date the Court enters this Consent Judgment and Order, 26 Defendant Mejorado shall notify the Secretary of the change, in writing, within fifteen (15) 27 calendar days. 28
12. The parties expressly understand and agree that the Secretary's agreement to 2 decline to bring a collection action at this time against Defendant Mejorado is based upon all of 3 the financial information available, including the representations Defendant Mejorado made in 4 his personal bankruptcy case (Case No. 10-11876-A-7) and that the Secretary has agreed not to 5 seek any additional monetary relief to the extent that such information is materially true and 6 accurate to the best of Defendant Mejorado's knowledge at the time such information was 7 provided. 8
13. If at any time the Secretary determines that Defendant Mejorado transferred assets 9 for the purpose of avoiding disclosure or making full repayment to the Plan as set forth in this 10 Consent Judgment and Order or materially misrepresented his financial condition, the Secretary, 11 by appropriate motion, may reopen her case against Defendant Mejorado and seek restitution to 12 the full extent of his liability to the Plan. 13
14. Each time a submission to the Secretary is required under this Consent Judgment 14 and Order, such submission shall be made by reliable overnight delivery or facsimile to: Jean Ackerman, Regional Director 15 United States Department of Labor Employee Benefits Security Administration 16 90 Seventh Street, Suite 11-300 San Francisco, CA 94103 17 Fax: 415-625-2499
15. This Consent Judgment and Order does not in any manner affect the right of the 19 United States Department of Labor to assess a civil penalty of twenty percent (20%) on amounts 20 recovered, or the applicable recovery amount, pursuant to ERISA Section 502(l), 29 U.S.C. 21 § 1132(l). Defendants agree to waive the notice of assessment and service requirement of 29 22 C.F.R. § 2570.83. Upon assessment, payment shall be made immediately unless Defendants file 23 a petition for waiver or reduction of the penalty as provided for in 29 C.F.R. §§ 2570.83--2570.87 24 and the Secretary agrees to waive or reduce the penalty. In the event that the Secretary does not 25 agree to waive or reduce the penalty, Defendants shall remit the penalty amount to the Secretary 26 within sixty (60) calendar days of receipt of the Secretary's decision denying Defendants' 27 28 petition. Defendants may not challenge the applicable recovery amount, the validity of the 2 violations alleged, or their liability for the violations. 3
16. Defendants expressly waive any and all claims of any nature that they have or 4 may have against the Secretary, the U.S. Department of Labor, or any of its officers, agents, 5 attorneys, employees or representatives, arising out of or in connection with the allegations 6 contained in the Complaint on file in this action, any other proceedings or investigation incident 7 thereto or based on the Equal Access to Justice Act, as amended. 8
17. The parties shall each bear their own costs, expenses, and attorney's fees incurred 9 to date in connection with any stage of this proceeding, including, but not limited to, attorney's 10 fees that may be available under the Equal Access to Justice Act, as amended. 11
18. Nothing in this Consent Judgment and Order is binding on any governmental 12 agency other than the United States Department of Labor, Employee Benefits Security 13 Administration. 14
19. This Court retains jurisdiction of this action for purposes of enforcing compliance 15 with the terms of this Consent Judgment and Order. 16
20. By signing their names to this Consent Judgment and Order, the parties represent 17 that they are informed and understand the effect and purpose of this Consent Judgment and 18 Order. 19
Dated: 20 21 Jesse Mejorado, an individual 22 23 Dated: ELECOM, INC. 24 25 Jesse Mejorado 26 Dated: M. PATRICIA SMITH 27 Solicitor of Labor MARY K. ALEJANDRO Acting Regional Solicitor DANIELLE L. JABERG Counsel for ERISA ISABELLA M. FINNEMAN Senior Trial Attorney Attorneys for Plaintiff HILDA L. SOLIS, Secretary of Labor
The Court directs the entry of this Consent Judgment and Order as a final order.
IT IS SO ORDERED. 10
CHIEF UNITED STATES DISTRICT JUDGE