By Pension and Benefits Editorial Staff
The Secretary of Labor has reached an agreement with Wilmington Trust, N.A. – a Delaware-based bank and trust company – requiring Wilmington Trust to pay a combined $80 million to 21 employee stock ownership plans (ESOPs) for which it served as trustee and $8 million to the government, and to reimburse plan sponsors of ESOPs for legal costs and expenses advanced in connection with the Secretary's investigations and litigation.
Investigations by the U.S. Department of Labor's Employee Benefits Security Administration (EBSA) found that Wilmington Trust caused losses to the ESOPs when it authorized them to pay more than fair market value for privately held employer stock, a violation of the Employee Retirement Income Security Act (ERISA). Wilmington agreed to settle EBSA's claims without admitting or denying those allegations.
The agreement resolves three lawsuits brought by the Secretary and 18 investigations by EBSA. The Solicitor of Labor's Plan Benefits Security Division and Regional Solicitor's Office in Chicago litigated the three lawsuits involving the ESOPs sponsored by Graphite Sales Inc., HCMC Legal Inc., and Stargate Apparel Inc.
The investigations resolved by the agreement involve the ESOPs sponsored by the following companies:
- A.H. Schreiber Co. Inc.
- Evy of California Inc.
- Ram 1971 Inc.
- Axia Consulting Inc.
- FST Logistics Inc.
- The Retina Institute
- Best Restaurant Equipment and Design Inc.
- Henny Penny Corp.
- Sterling Staffing Inc.
- Cohen Ventures Inc.
- Life's Abundance Inc.
- Trius Inc.
- Consolidated Bus Transit Inc.
- Mapsys Inc.
- The Vertex Companies Inc.
- Cost Containment Group Inc.
- Paramount Marketing Consultants Inc.
- West-Camp Press Inc.
The agreement is expected to result in payments to approximately 5,000 participants in those plans.
“An employee stock ownership plan's promise of retirement income for workers depends on paying a fair price for an employer's stock, and fiduciaries hired to represent an ESOP must satisfy their responsibilities to prevent them from paying more,” said Assistant Secretary of Labor for the Employee Benefits Security Administration Preston Rutledge. “The department's actions here reflect its commitment to protecting the retirement income of ESOP participants, and holding accountable fiduciaries who fail to satisfy their obligations.” “Companies acting on behalf of retirement plan participants must always act in good faith and in the best interest of their employees,” said Solicitor of Labor Kate S. O'Scannlain. “When they breach that obligation, they put their employees' financial security in jeopardy, and will face legal action.”
Source: DOL News Release, No. 20- 796-NAT.
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