DOL Sues ESOP Trustee, Alleging Overpayment for Shares
Executive Director
On December 26, the Department of Labor's Employee Benefits Security Administration (EBSA) announced that it had filed a civil suit to recover losses by ESOP participants at Miller's Health Systems. In the suit, Perez v. PBI Bank (civil action number: 3:13-cv-1400-PPS), EBSA alleges that in 2007 the trustee overpaid for the shares it acquired and approved financing for the transaction at an excessive interest rate, violating the trustee's ERISA requirements of prudence and loyalty. The plan paid $40 million for 100% of the company's shares, although managers have equity awards potentially worth 20% of the equity value.
The suit seeks to recover all alleged losses, plus interest, for participants and to prohibit the trustee, PBI Bank, Inc., from serving as a service provider or trustee for plans covered by ERISA. The ESOP at Miller's Health Systems, a privately held company, has almost 3,000 participants and assets of almost $13 million.