More Than $9.3 Million Recovered For Minnesota ESOP
U.S. Department of Labor Recovers More Than $9.3 Million For Minnesota Employee Stock Ownership Plan After Investigation Finds Plan Overpaid For Shares – Order Protects Retirement Fund Of Kurt Manufacturing Company ESOP Eligible Employees
The U.S. Department of Labor has recovered more than $9.3 million for participants of a Minneapolis manufacturing company’s employee stock ownership plan (“ESOP”), after the fund overpaid for company stock in 2011, under the terms of a consent judgment entered in a federal court.
Entered in the U.S. District Court for Minnesota, the judgment ordered the ESOP’s previous trustee – Reliance Trust Company (“Reliance Trust”) – to restore $8,409,090 to the plan to resolve a lawsuit filed by the department. The court also ordered Reliance Trust to pay an $840,909 penalty for violating the Employee Retirement Income Security Act.
The action follows an investigation by the department’s Employee Benefits Security Administration and subsequent lawsuit alleging Reliance Trust caused the ESOP to overpay when it purchased the remaining shares of Kurt Manufacturing Company Inc. stock for $39 million in October 2011.
Kurt Manufacturing Company board members and fiduciaries of the company’s ESOP – Steven R. Carlsen, Paul A. Lillyblad and Kelli Watson – will restore $984,042 to the plan. The lawsuit alleged that, as the ESOP’s fiduciaries, the board members failed to monitor Reliance Trust’s determination of the stock’s value and allowed the company to purchase it for more than its true value. The court also ordered the directors to pay a $215,957 penalty for violating the Employee Retirement Income Security Act.
In total, the department recovered $9,393,132 for the participants in the Kurt Manufacturing Company Inc. Employee Stock Ownership Plan.
The three Kurt Manufacturing Company board members also agreed to not participate in Kurt’s stock appreciation rights plan; forego their right as of July 1, 2021 to any future contributions from Kurt to the supplemental executive retirement plan and rescind agreements that provided termination severance payments of their contract salaries for two years. The court barred Lillyblad and Watson from serving as fiduciaries of the ESOP in the future and barred Carlsen from serving as a fiduciary to any ERISA-covered plans.
Source: U.S. Department of Labor