GreatBanc Trust Co. agreed to pay $5.25 million to settle charges of improper valuation of the Sierra Aluminum Co. employee stock ownership plan.
The settlement announced Tuesday resolves a 2012 lawsuit brought by the Department of Labor against the Lisle, Ill.-based company, alleging that as a trustee, GreatBanc failed to verify appraisals for a 2006 stock purchase from Sierra executives that later was deemed to be above fair-market value. The appraisals, DOL officials claimed, were “unrealistic and aggressively optimistic.”
GreatBanc and its insurers will pay $4.8 million to the ESOP of Sierra Aluminum, based in Riverside, Calif., and $477,273 in civil penalties.
In a statement, GreatBanc Trust President and CEO James Staruck said that “collaborative discussions” with Labor Department officials also led to a new process for his firm to follow when it purchases or sells stock for an ESOP. GreatBanc Trust is a 100% ESOP-owned company. “We look forward to a positive relationship with the DOL going forward,” Mr. Staruck said.
“Others in the industry would do well to take notice of the protections put in place by this agreement,” said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi in a statement. “ESOPs are an important tool to promote employee ownership, not a way to create big cashouts for owners and top executives.”