DOL sues NY-based ESOP for breach of fiduciary duty
By Paula Aven Gladych
The U.S. Department of Labor has filed a lawsuit against Rembar Inc.’s Employee Stock Ownership Plan for losses its participants incurred after the ESOP allegedly was allowed to purchase overvalued company stock.
Rembar is a New York-based distributor and manufacturer of precision parts made from refractory metals.
The suit alleges that in June 2005 First Bankers Trust Services, the independent fiduciary and trustee to the plan, allowed the plan to purchase 100 percent of the company’s stock from owner and CEO Frank Firor and Firor’s relatives for $15.5 million. An investigation by the Employee Benefits Security Administration determined that First Bankers Trust Services failed to comply with its fiduciary duty to understand the valuation report that set the purchase price, identify and question assumptions in the report, and verify that the conclusions in the report were consistent with the company’s financial data. Because of this, plan participants overpaid for the stock and suffered losses.
"Employee Retirement Income Security Act fiduciary duties are the highest standard of care known to the law and apply to those who manage employee benefit plans," said Jonathan Kay, regional director of the Labor Department's Employee Benefits Security Administration's New York Regional Office. "The department remains committed to ensuring that fiduciaries work solely in the interest of plan participants and beneficiaries."
The lawsuit seeks to recover all losses suffered by the plan from First Bankers Trust and Firor.
Originally published on BenefitsPro.com