U.S. Suing 2 Texans Over an Empty Pension Fund
For all that Bernard Mass may have done to Whiteworth, so far it is only the two Texans who gave him control of the company who have been held accountable for Whiteworth’s woes.
Don M. Sweatman and Larry V. Locke chose not to defend themselves against a civil complaint filed in April by the U.S. Labor Department accusing them of violating federal pension laws by raiding Whiteworth’s pension plan in March, 1987, a few months after they took over the firm.
In the lawsuit, filed in U.S. District Court in Los Angeles, the government charged that the brothers-in-law deposited more than $1 million from the plan in the San Antonio branch of a Bahamian bank, then got $980,000 back as a loan to Whiteworth.
Acknowledging that they are the objects of a parallel criminal investigation by the FBI, the Texans cited the Fifth Amendment in refusing to respond to the civil charges. The government lawsuit alleges that they violated their duty to operate the pension plan for the sole benefit of its participants--Whiteworth’s employees.
Only after the transaction with the Bank of Nassau did Sweatman lay out the details to the outside directors of the public company that he and Locke controlled, which in turn owned Whiteworth.
“He said, ‘You probably will want to resign when you hear this,’ ” recalled Royce Diener, former chairman of American Medical International, the big hospital management company. “At that point I felt I was involved with something I had insufficient knowledge about and shouldn’t have anything to do with.”
Some of the roughly 100 former Whiteworth employees who are due benefits from the pension plan--either now or as they get older--complain that quicker government action could have prevented the problems.
A. D. White, the company’s founder, had taken steps to terminate the plan and distribute its assets to covered employees before he sold Whiteworth early in 1986. But it wasn’t until April, 1988, that the Internal Revenue Service approved the termination.
By that time, the money apparently was long gone.
Since then, responsibility for the plan has been batted back and forth by the Labor Department and the Pension Benefit Guaranty Corp., the government-owned agency that insures private pension plans. The PBGC now is moving to place the plan in trusteeship and begin making payments to the five former employees who already qualify for benefits, an agency spokesperson said.
Because the assets are missing, all payments will come from the guaranty corporation’s already overtaxed coffers.
“The left hand doesn’t know what the right hand is doing,” said Thomas R. White, the brother of A. D. White and former vice president of purchasing at Whiteworth. The Fountain Valley man said he is owed more than $63,000 in benefits.
