PRESQUE ISLE – The U.S. Department of Labor on April 22 settled a civil complaint against three pension plan trustees of the former Pepsi-Cola Bottling Co. of Aroostook for allegedly mismanaging nearly $780,000 of the company’s pension fund.

A consent judgment resolving the matter also was filed April 22 with the clerk at U.S. District Court in Portland.

The complaint listed J. Gregory Freeman, the former president and treasurer of the company, Katherine F. Freeman and Kevin G. Freeman as defendants.

In agreeing to the settlement, the defendants neither admitted to nor denied the federal complaint against them.

The complaint alleged that between January 1997 and April 10, 2003, the three violated sections of the U.S. Employee Retirement Income Security Act of 1974.

In general, it charged that the defendants used or allowed to be used pension funds that did not belong to them for their own purposes, made an improper loan to a family member, who also was a plan trustee, and made a payment to another participant that was greater than that person’s vested interest in the plan.

All of the inappropriately used funds have been repaid to the plan, plus interest at the rate of 9.5 percent, Ted Fitzgerald, spokesperson for the Department of Labor in Boston, said Friday.

The company’s pension plan is a profit-sharing agreement funded solely by employer contributions, with no employee contributions. There are about 20 participants in the plan.

The issue of misuse of pension funds was brought to the attention of the Department of Labor last year by another plan participant, according to Fitzgerald.

An investigation was conducted by the federal Employee Benefits Security Administration, which resulted in the complaint against the defendants.

In the consent judgment approved by the court, the defendants are prohibited from transferring pension funds to their own accounts or from making loans to other people who have direct control over those funds.

They also are prohibited from serving in any fiduciary capacity over a pension fund governed by federal law.

The pension fund also will be liquidated and, when that is done, the trustees must provide evidence within 90 days that all distributions have been made in accordance with law and in the interests of the plan participants, Fitzgerald said.

In agreeing to the settlement, the defendants neither admitted nor denied guilt.

“The significance here is that fiduciaries have a responsibility not to engage in prohibited acts,” Fitzgerald said. “They need to carry out their duties with prudence.”

Pepsi of Aroostook filed for Chapter 11 bankruptcy protection in November 2001. According to documentation filed Jan. 4, 2002, with the bankruptcy court, the company listed assets of about $2.5 million and liabilities of almost $3.8 million.

The Freeman family had owned the company from 1947 until it was sold in May 2002 to Pepsi Bottling Group of Somers, N.Y.

Gregory Freeman no longer works for the company. A telephone company recording indicated Friday that his listed home telephone number had been disconnected temporarily at the owner’s request.

Telephone numbers could not be found for the other defendants.

The federal complaint alleges that on Jan. 3, 2000, Gregory Freeman transferred $561,682.61 from various company pension accounts to another company pension account at First Citizens Bank.

According to the complaint, a total of $618,682.61 plus $25,839 accrued interest then was withdrawn from that pension account at First Citizens Bank and placed into an Individual Retirement Account belonging to Freeman, and documented as a “rollover.”

Freeman reportedly then cashed his IRA for $644,522 and deposited that money in a company corporate account at Katahdin Trust Co.

Freeman’s vested interest in the company pension plan was $441,861.59.

The federal complaint also alleges that on Oct. 22, 1997, the defendants permitted the improper transfer of another $130,000 from the pension plan’s checking account as a loan to Kevin Freeman, even though his vested interest in the plan was only $19,561.

The loan was made as a verbal agreement, with no documentation or collateral agreement.

According to the complaint, the plan’s loan policy states that loans can’t exceed 50 percent of a participant’s vested interest.

The Department of Labor also considered the loan impermissible because Kevin Freeman was a pension plan trustee with direct control of pension funds.

The department further alleges that on Jan. 6, 1999, the trustees permitted a distribution of $13,720.66 to a participant identified as B. Plourde, even though Plourde’s vested interest in the plan was only $4,984.

The trustees failed to object to or collect the overpayment, according to the complaint.