THREE DEMOULAS TRUSTEES FOUND GUILTY

ELLIOT ZWIEBACH

BOSTON -- The president of Demoulas Supermarkets here, his son and the chain's chief financial officer have been found guilty of using the assets of the company's $100 million employee pension plan for their own personal benefit. Federal Judge Rya Zobel ruled that Telemachus A. Demoulas, his son, Arthur T. Demoulas, and Harold Sullivan, the chain's chief financial officer, had abused their positions as trustees of the company's pension plan by operating the plan, the supermarkets and their personal investment companies in a "symbiotic relationship" in which "decisions were repeatedly made that were in their own personal interests rather than the sole and exclusive interest of the employees." The judge found the three trustees guilty of violating the rules of the Employee Retirement Income Security Administration -- in contrast to a ruling by another judge in a related case a year earlier in which there was no finding and no admission of guilt on the defendants' part. That earlier suit was filed by the U.S. Department of Labor, which has oversight of pension plans. Judge Zobel's ruling came as a result of a suit filed in 1991 by the widow and children of George Demoulas, brother of Telemachus Demoulas, on behalf of themselves and other participants and beneficiaries of the 25,000-member pension plan. In settling the Department of Labor suit last year, the defendants did not admit guilt but agreed to repay $750,000 to the pension plan; to remove liability for certain loans totaling $29.7 million from the pension plan by selling them to family members; to put limits on the kinds of investments they could make on behalf of the plan, and to adhere to the injunction against future ERISA violations. Members of George Demoulas' family sought additional penalties in their suit, in an effort to have the trustees ousted. However, Judge Zobel said the settlement agreement with the Department of Labor in the earlier suit had included sufficient penalties, and she declined to remove the three men as trustees of the pension plan.