The Department of Labor (DOL) has reached a settlement with PBI Bank in a lawsuit regarding the bank’s role as trustee of the Miller’s Health Systems, Inc. employee stock ownership plan (ESOP).
In the suit, the DOL alleges that PBI Bank authorized the purchase of company stock by the plan for $40 million, an amount far in excess of the fair market value of the stock. It is also alleged that PBI Bank approved financing for the transaction at an excessive interest rate.
The DOL charged PBI Bank with violating the Employee Retirement Income Security Act (ERISA) after it determined the stock purchase was not made for the primary benefit of participants and did not promote employee ownership in Miller’s Health. The suit sought to require PBI Bank to restore all losses suffered by the ESOP, plus interest.
A federal court in Indiana has entered an Agreed Order and Judgment requiring PBI Bank to pay $1,052,613 to the ESOP to restore alleged losses. The terms of the judgment also require PBI to pay $83,750 to Miller’s Health Systems and penalties of $113,636 to the department for violating ERISA.
Neither Miller’s Health Systems nor PBI Bank have acknowledged any wrongdoing in the matter. However, PBI Bank, a subsidiary of Porter Bancorp in Louisville, Kentucky, has agreed to refrain from serving as a trustee or service provider for any plan covered by ERISA, with a few exceptions.
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