YOUNGSTOWN Spike Industries to repay funds
The company must relinquish management of its profit-sharing plan because of the violations.
YOUNGSTOWN -- Spike Industries, a maker of railroad spikes based in Youngstown, has agreed to repay $301,555 to its employee profit-sharing plan after a government investigation concluded the company and its president improperly used the plan's assets.
Violated act: A consent order and judgment issued this week by a federal judge in U.S. District Court in Cleveland says the company and James H. Smith, its president and owner, violated the Employee Retirement Income Security Act when they:
* Improperly made a series of loans from the profit-sharing plan to the company from May 1994 through January 1999.
* Improperly authorized a $41,000 loan from the plan funds to Smith.
* Failed to remit timely employee salary deferral contributions to the plan.
Under the judgment, Smith must waive his right to benefits totaling $390,002 under the profit-sharing plan until Spike Industries reimburses the plan. The judge established a 36-month repayment schedule under which the company may repay the plan by June 30, 2004.
The company and Smith are also required to turn over management of the plan to an independent agent and are permanently barred from serving any plan governed by a federal employee benefit law, except fully insured welfare plans.
Smith could not be reached to comment Friday afternoon.
How case came about: The court case resulted from an investigation conducted by the Ohio Department of Labor's Cincinnati office. Spokeswoman Gloria Della said the violations were civil in nature and the department is not alleging criminal violations were involved.
She said the profit-sharing plan at Spike Industries is an employee benefit plan provided by the company, and employees also have the option to make additional, tax-deferred contributions into the plan.
"Our only objective was to get the money back and put it back into the plan to benefit the employees," she said.