Compliance

Fiduciaries of California ESOP to Repay Plan Funds

By Kevin McGuinness editors@plansponsor.com | October 23, 2013

October 23, 2013 (PLANSPONSOR.com) – The Department of Labor (DOL) has obtained a consent order for fiduciaries to repay funds to an employee stock ownership plan (ESOP).

The order requires fiduciaries of the Parrot Cellular ESOP to pay $4,181,818 to the plan. The settlement resolves a lawsuit filed in April 2012 after an investigation by the DOL’s Employee Benefits Security Administration found the fiduciaries violated the Employee Retirement Income Security Act (ERISA) by causing or permitting the ESOP to purchase Parrot Cellular stock for more than fair market value.

The suit, filed in the U.S. District Court for the Northern District of California, named the following as defendants: Dennis Webb, the principal owner of California-based Entrepreneurial Ventures Inc. (EVI); Matthew Fidiam and J. Robert Gallucci, EVI executives and ESOP trustees; and Consulting Fiduciaries Inc., an Illinois company that served as the independent fiduciary for the ESOP during a November 2002 stock purchase. EVI operates Parrot Cellular telephone retail stores and is the sponsor of the worker retirement plan.

“Employee stock ownership plans can have great benefits for workers, but only if they adhere to the laws that govern them,” said Secretary of Labor Thomas E. Perez. “We are very pleased to have resolved this matter in a way that brings the plan into compliance with the law and benefits the plan’s participants.”

Under the terms of the settlement agreement, Consulting Fiduciaries agreed to pay $2 million to the ESOP to settle the allegations. Webb, Fidiam and Gallucci agreed to collectively pay $1.5 million, and Webb agreed to individually pay an additional $681,818.