Mark Singleton, Jill Singleton and Carolyn Bennett, trustees of the Western Spray Painting Inc. ESOP, agreed to restore $1.2 million to the plan and pay $236,667 in civil fines, according to a Department of Labor (DoL) announcement. The trustees are permanently barred from serving in a future fiduciary capacity for any plans governed by the Employee Retirement Income Security Act (ERISA). The defendants also waived their right to receive benefits from the ESOP.
The DoL lawsuit, filed in December 2002 in federal court for the Eastern District of California, alleged that the Singletons and Bennett improperly used plan assets to purchase company stock at prices in excess of the stock’s actual value. They also allegedly used ESOP assets rather than corporate money to purchase stock and repay a stock acquisition debt of the employer, the government alleged.
According to the DoL, before the improper stock purchase, the plan had assets of $1,157,441 in cash, cash equivalents and employer stock. Currently, the plan has only $180,519 in cash, in addition to the now-worthless stock. There are 236 participants in the plan.