The Department of Labor (DOL) has recovered more than $9.3 million for participants of the Kurt Manufacturing Co. Employee Stock Ownership Plan (ESOP) following an Employee Benefits Security Administration (EBSA) investigation into the company plan.
The judgment in the U.S. District Court for the District of Minnesota ordered the ESOP’s previous trustee, Reliance Trust Co., to restore $8,409,090 to the plan to resolve a lawsuit filed by the EBSA. Reliance was also ordered to pay an $840,909 penalty for Employee Retirement Income Security Act (ERISA) violations.
This action follows an investigation by EBSA and a lawsuit alleging that Reliance caused the ESOP to overpay for company stock when it purchased the remaining shares of Kurt Manufacturing Co. stock for $39 million in 2011.
The lawsuit alleged that the ESOP’s fiduciaries were derelict in monitoring Reliance’s determination of the stock’s value and that they allowed the company to overpay above the actual cost.
“This settlement restores employees’ hard-earned retirement funds of the Kurt Manufacturing Company Inc. Employee Stock Ownership Plan and ensures executives responsible for the overpriced purchase of stock receive no future benefits from their decision,” said EBSA Acting Regional Director Mark Underwood. “Fiduciaries must always work in the best interest of the fund.”
Kurt Manufacturing board members and fiduciaries on the company’s ESOP were ordered to restore $984,042 to the plan.
Additionally, the court ordered the directors to pay a $215,957 penalty for the ERISA violation. Altogether, the DOL recovered $9,393,132 for the participants in the Kurt Manufacturing Co. ESOP.
Kurt board members also agreed to not participate in the Kurt’s stock appreciation rights plan; to forego, as of July 1, 2021, any future contributions from Kurt to the supplemental executive retirement plan; and to rescind agreements that provided termination severance payments of their contract salaries for two years.
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