Compliance March 11, 2010

DoL Recovers More than $12M for CA Company ESOP Participants

March 11, 2010 (PLANSPONSOR.com) - The U.S. Department of Labor has obtained consent judgments providing for restitution of more than $12 million by plan officials and service providers involved with the employee stock ownership plan sponsored by The Employee Ownership Holding Co. of Stockton, California, and Fife, Washington.
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The judgments also provide for release of a fund currently holding more than $11 million, thereby making more money available to provide benefits to the ESOP’s participants and beneficiaries, according to a press release.  In addition, the defendants will be barred for at least 10 years from serving in a fiduciary capacity to plans, and the attorney service providers will be required to comply with strict requirements in connection with their future involvement with employee benefit plans. 

Under the judgments and a settlement agreement filed in a related private lawsuit, the settling defendants must pay $8 million in cash into a settlement fund, pay $800,000 in civil penalties to the federal government and return property to The Employee Ownership Holding Co. with an estimated value of $4 million for the benefit of the ESOP and its participants, the announcement said.

In 2008, the DoL sued the firm’s board of directors, ESOP trustees, attorney, certified public accountant, and valuation adviser, alleging that the defendants imprudently used ESOP assets to purchase company stock from President and Chief Executive Officer Clair R. Couturier Jr. at an inflated price, and engaged in transactions that caused millions of dollars of harm to the ESOP and its participants, while enriching themselves (see CA Firm Charged with Misusing ESOP Assets).

In addition to $26 million in cash, in exchange for the stock, Couturier received a $5.5 million property in Palm Desert, California, $2.7 million in cash to pay taxes on that property, a $200,000 car, and a country club membership.

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