Labor Dept. Files Suit in Calypso 401(k) Dispute

DALLAS – A dispute over the former Calypso Waterjet Systems Inc.’s employee retirement savings plan is the focus of a civil suit on Nov. 15 by the U.S. Department of Labor.

The action, made in the U.S. District Court for the Northern District of Texas-Dallas Division, charges the company and its officers with allegedly failing to forward employee contributions and loan repayments to the company’s 401(k) plan, and for misusing plan assets for the benefit of the company in violation of the Employee Retirement Income Security Act (ERISA).

The civil suit, Solis v. Calypso Waterjet Systems Inc., alleges that the former company and its then-owners/officers, Denis Lufkin and Johnnie Howard, failed to timely segregate and remit to the plan employee contributions and loan repayments between Jan. 1, 2007, and Jan. 1, 2009. The suit also claims the defendants failed to properly administer the plan, and used plan assets to benefit themselves.

A statement from the Labor Department noted that Calypso laid off all of its 59 employees in January 2009. On Feb. 3, 2009, the company ceased operations.

The suit seeks a court order to require the former Calypso firm and its officers to restore all losses, with interest, to the plan, although there’s no specified total noted in the action.

The suit also seeks to remove Lufkin and Howard from their positions with the plan after the plan is terminated and the assets are disbursed. It also asks for Lufkin and Howard to be permanently barred from serving as fiduciaries or service providers to any plan governed by ERISA in the future.

“Plan officials have a duty to manage and protect employees’ benefit plans and their assets,” said Roger Hilburn, the Dallas Regional Office director of the department’s Employee Benefits Security Administration, which investigated this case. “Our action today is designed to restore plan assets that were not properly preserved for the company’s workers.”

St. Michael, Minn.-based Jet Edge Inc. acquired the intellectual assets, including the brand names, of Calypso, in a September 2009 auction. Jet Edge is not involved in the Labor Department civil suit.

Original publication ©2010 Western Business Media Inc. Use licensed to the author.

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