Colonial Bank employees ask court to reconsider asset ownership ruling

By Caroline Salls

Pittsburgh, July 7 - A group of Colonial Bank employees asked the U.S. Bankruptcy Court for the Middle District of Alabama to reconsider an order granting ownership of roughly $1.9 million in deferred compensation plan assets to The Colonial BancGroup, Inc., according to a Tuesday court filing.

The motion was filed on behalf of the employees by attorney Richard D. Shinbaum.

As previously reported, judge Dwight H. Williams Jr. said the deferred compensation plan qualified as a "top hat" plan, and, as a result, the assets are property of Colonial BancGroup's estate.

However, the plan participants said Colonial Bank and Colonial BancGroup are separate corporations, and all of the employees, except one, worked for the corporation known as Colonial Bank.

In addition, the employees said almost all of the funds in this case came to the trust in question from the assets and proceeds of Colonial Bank.

The employees said the funds were also paid on the bank for disbursement, not to the parent company.

As a result, the employees said the court must apply a constructive trust in this case.

"The property placed in the trust was clearly placed there by Colonial Bank for the benefit of Colonial Bank employees from the funds owed by Colonial Bank employees and at all times, was the money of Colonial Bank and not Colonial BancGroup," the employees' motion said.

According to the ruling, a top hat plan is an unfunded plan that is maintained by an employer to provide preferred compensation "for a select group of management or highly compensated employees."

These plans are often excluded from individual Employee Retirement Income Security Act of 1974 provisions, because the covered employees are "in a strong bargaining position" and therefore do not need the same protections given to other employees.

The plan assets totaled $1.9 million when the company filed for bankruptcy in August 2009.

Colonial BancGroup is the Montgomery, Ala.-based holding company for Colonial Bank. The company filed for bankruptcy on Aug. 25, 2009. Its Chapter 11 case number is 09-32303.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.