DOL Enters Into New Settlement Agreement on ESOPs

The Department of Labor entered into a new settlement agreement with an ESOP fiduciary, in this case Alpha Investment Consulting Group. The settlement arises out of a case alleging improper valuation and loan terms in the case of Acosta v. Mueller et al., Civil Action No.: 2:13-cv-01302 (E.D. Wis. Dec. 27, 2017). The DOL alleged that the ESOP at Omni Resources overpaid for the shares by using a valuation done four months prior that did not reflect changed financial projections. In the settlement with Omni, the former owners agreed to repay the plan $1.523 million, reduce the amount due on the loan by $3.5 million, and pay an ERISA penalty of $479,000 to the DOL. Allocations from the payments to the ESOP will be retroactive to 2008, and former vested participants will receive part of the settlement as well.

The settlement agreement with the Alpha Investment Consulting Group concerned the portion of the suit seeking to preclude Alpha Investment Group from serving in the future as fiduciary. The agreement breaks little new ground from the prior settlement with GreatBanc Trust, First Bankers Trust, and James Joyner. It adds that where seller financing is used (as it was here), but outside financing was available, the fiduciary should evaluate whether the outside financing provided better terms, and, if so, why seller financing was used. The agreement also calls for the trustee to evaluate the need for a fairness opinion, although that is already standard practice.