More than $9.3 million has recently been recovered by the U.S. Department of Labor (DOL) for employees participating in a Minneapolis manufacturing company’s employee stock ownership plan (ESOP) after the trustee was found to have overpaid for stock in 2011.
Reliance Trust Company was ordered by a federal court to pay $8,409,090 to the Kurt Manufacturing Company Inc. ESOP, a Jan. 6 DOL press release said. An additional $840,909 in penalties was also ordered for violating the Employee Retirement Income Security Act.
“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,” Employee Benefits Security Administration Acting Regional Director Mark Underwood, based in Kansas City, Missouri, said in the release. “Fiduciaries must always work in the best interest of the fund.”
The judgment comes on the heels of an investigation by the DOL’s Employee Benefits Security Administration and a lawsuit that alleged Reliance was responsible for overpayment when it placed a $39 million order in October 2011 to purchase the outstanding shares of Kurt Manufacturing, the release said.
Three board members of Kurt Manufacturing were also found liable after failing “to monitor Reliance’s determination of the stock’s value” and allowing the sale to go through, the release said. They will be responsible for restoring $984,042 to the plan and an additional $215,957 in penalties. The members also will be barred from participating in the company’s appreciation rights plan.
“In total, the department recovered $9,393,132 for the participants in the Kurt Manufacturing Company Inc. Employee Stock Ownership Plan,” the release said.
