The U.S. Department of Labor has filed suit in U.S. District Court accusing a Utah company of making unsound loans from a pension fund and breaching its fiduciary duty.

The suit was filed against Terry Harmon, F. Ray Green, Harmon City Inc. and Midwest Realty and Finance Inc. under federal pension law.According to the suit, from February 1972 to May 1986, Terry Harmon was a trustee of a Harmon City Inc. pension plan, president of Harmon City Inc., and a director of Midwest. Green was a trustee of the plan, secretary-treasurer of Harmon City Inc. and president and general manager of Midwest.

The suit alleges that from Dec. 23, 1981 to the present, Harmon and Green breached their duty to the pension plan by:

- Causing it to lend $6 million to Midwest.

- Causing it to "enter into loans with defendant Midwest when Midwest's deteriorating financial condition made it a poor credit risk."

- Lending money to Midwest without always obtaining adequate security.

- Causing the plan to accept property in lieu of money owed, "some of which was over valued and inadequate to repay the loans." This property required "considerable expenditures," the suit says, costing the plan money.

- Causing the plan to "enter into loans with other parties . . . some of which loans were inadequately secured."

- Failing to act promptly when loans were in default or payments were delinquent.

The Labor Department seeks to ban Harmon and Green from acting in any fiduciary capacity with respect to any employee benefit plan for at least 10 years. It also wants all "prohibited transactions" to be rescinded, and would like the court to order the plan reimbursed.