Compliance September 14, 2005

Azon Corp. to Restore ESOP Money

September 14, 2005 (PLANSPONSOR.com) - Azon Corp. has agreed to a settlement of $9.35 million for employee stock ownership plan (ESOP) benefits to participants who say the company depleted the plan's assets before declaring bankruptcy.
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According to an article on the Binghamton Press & Sun’s Web site, several employees filed a class action lawsuit in 2002, alleging that an insider stock transaction wiped out the company’s ESOP while earning some corporate insiders $25 million.   The employees claimed that plan administrators and trustees violated the Employee Retirement Income Security Act (ERISA) and breached their duties to shareholders by allowing corporate insiders to cash out their own company stock and sell it to Azon’s ESOP at an inflated price.

The employees also claim the 1999 transaction caused the company and the plan to carry more debt than it could handle and eventually contributed to Azon’s bankruptcy in July 2002, the Press & Sun reports.

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About 435 plan participants will receive a payment of around $16,000 after the settlement is adjusted for lawyer fees and expenses related to administering the settlement.

Attorneys for the workers say the almost 100% recovery is very unusual for such cases.   The plan was appraised at about $10.2 million before the company declared bankruptcy, according to the Web article.

Compliance September 13, 2005

Illegal Alien Covered Under Worker's Comp

September 13, 2005 (PLANSPONSOR.com) - Maryland's Supreme Court ruled that an illegal alien injured on the job is deemed a covered employee eligible for workers compensation benefits under Maryland law.
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Business Insurance reports that in Design Kitchen and Baths vs. Diego E. Lagos, the employer and insurer Princeton Insurance Co. argued that Lagos, injured on the job in 2001, must be denied workers comp benefits because his illegal alien status prohibited him from entering into an employment contract.  

Design Kitchen and the insurer also argued that because Lagos’ claim conflicts with the Immigration Reform and Control Act of 1986, their employment contract is void regardless of whether the employer or employee violated federal law.

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The Maryland Workers Compensation Commission and a trial court both ruled in favor of Lagos, and the Court of Appeals affirmed the ruling.   According to Business Insurance, the appeals court found that, while Maryland’s workers comp law does not specifically address undocumented worker status, it does state that any uncertainty is to be resolved in the claimant’s favor.

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