DOL Enters into New Process Agreement with ESOP Trustee

In an agreement flowing out of Acosta v. Bat Masonry Company (W.D. Va. Sept. 29, 2017), the Department of Labor and ESOP trustee James Joyner entered into a process agreement that very closely mirrors the 2014 GreatBanc process agreement. Joyner will pay $15,000 in the settlement in a case involving an alleged overvaluation of shares. Charges against other defendants are still pending, although two other prior settlements with defendants also were concluded for nominal sums. Joyner had acted as a trustee in the case.

The process agreement with Joyner adds only a few new elements to the GreatBanc agreement, most notably about ensuring the independence of the valuation advisor and the reliability of financial information provided to the trustee. For example:

• The agreement increases the time period during which an appraiser cannot have previously worked with the trustee; the vetting process must be repeated if it is more than 24 months old instead of 15.
• The agreement tightens language concerning when it is appropriate to use unaudited statements.
• It adds a requirement that the trustee obtain fiduciary insurance or be a named fiduciary under the sponsor's policy. Joyner worked as an individual outside trustee; institutional trustees would have their own insurance.

This agreement follows on another recent agreement between the DOL and an ESOP trustee, First Bankers Trust Services. More detail on that agreement are in our update for early October.