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Regulation

First Bankers Trust Services to pay $15.75 million to settle 3 ESOP cases with DOL

First Bankers Trust Services Inc., Quincy, Ill., agreed to pay $15.75 million to three employee stock ownership plans to settle Department of Labor charges that it approved improper stock valuations that led to millions of dollars in losses for plan participants.

The Labor Department filed suit against First Bankers Trust Services in 2012 in the U.S. District Courts in New York and New Jersey, following investigations by the New York office of the Employee Benefits Security Administration into the firm's authorization of stock purchases for ESOPs sponsored by Maran Inc., New York; Rembar Co. Inc., Dobbs Ferry, N.Y.; and SJP Group Inc. SJP Group is no longer in business.

First Bankers Trust Services will pay $8 million to the SJP ESOP, $6.6 million to the Maran ESOP and $1.1 million to the Rembar ESOP.

FBTS also agreed to improve its procedures for making those valuations, including requirements for the selection and oversight of a valuation adviser, analysis required for the fiduciary review process, and documentation of the valuation analysis. "These settlements provide not only for reimbursement to these ESOPs and their participants; they commit First Bankers Trust Services to clear procedures to enhance and ensure proper compliance in the future," said Jeffrey S. Rogoff, a Labor Department regional solicitor, in a statement.

In all three cases, FBTS served as a trustee and fiduciary of the ESOP, which required it to ensure that the ESOPs paid no more than fair-market value for the employer stock. DOL officials alleged that FBTS approved transactions without proper due diligence, causing the ESOPs to overpay by millions of dollars for the stock they purchased.

The SJP court case ended in First Bankers Trust Services being found to have breached its duties; the Maran case went to trial, but the parties settled before judgment; and the Rembar case was awaiting trial in New York.

Brian Ippensen, First Bankers Trust Services president, said the company spent five years litigating the cases, which involved transactions that happened more than 10 years ago. He said in an interview that the process improvements were helpful. "I'm glad to be moving forward from it," Mr. Ippensen said.