SYRACUSE - Retirees from a defunct upstate New York agricultural cooperative will receive nearly $8.6 million under a settlement announced Thursday by the U.S. Department of Labor.

Agway Inc. also agreed to pay a civil penalty of $859,000 plus interest to the labor department. And pension plan officials and the company's board of directors were barred from involvement in any employee benefit plans for one to two years unless they first complete fiduciary training, said U.S. Secretary of Labor Elaine Chao.

The settlement involved recovery on about $15 million in preferred stock that had been deemed worthless by a bankruptcy court, meaning retirees will now be recouping more than 50 percent of their losses, said Ned Tudi, an Agway retiree and a member of the now-disbanded retired unsecured creditors committee.

“If the lawsuit had not been brought ... retirees would have lost the entire amount of the preferred stock, so to get 50 percent of it is a fair settlement for the retirees,” said Tudi, of Cazenovia, a former personnel director.

Agway was once the largest agricultural cooperative in the country, with 69,000 farmer-members in the Northeast, 2,700 employees and peak sales of $4.1 billion in 1984. Founded to help farmers sell their products, Agway developed into a business that mainly sold animal feed, fuel and other products.

The DeWitt-based company was driven into bankruptcy court in October 2002 by spiraling debt.

The labor department sued Agway in 2006, accusing administrators of imprudently investing $50 million of the company's 401(k) plan in the securities of the company, valuing company stock at prices higher than market value, and giving participants false information about the investment.

The agency said the board of directors failed to protect the interests of participants and beneficiaries by failing to oversee the activities of its two pension committees.

The lawsuit named as defendants 47 individual members of the investment committee, administration committee and the Agway board or directors.

Lawyers representing the defunct company could not be immediately reached for comment.

As part of the bankruptcy proceeding, retirees were already receiving about 60 cents on the dollar for some $33 million in general securities included in the pension fund, Tudi said. The remaining $2 million was in cash reserves.

The 401(k) plan covered about 4,080 participants.

Another $65 million of employees' retirement funds were invested in other accounts that were not affected by the lawsuit.

An independent administrator, Fiduciary Counselors Inc., was appointed in 2004 to manage the plan. They have also filed a lawsuit against Agway administrators seeking to recover the full amount of employees' pensions.