The Department of Labor sued the fiduciary of the Triple T Transport Inc. employee stock ownership plan for authorizing purchases of company stock that the DOL said were overvalued.
The lawsuit, filed Monday in U.S. District Court in Columbus, Ohio, claims that Thomas E. Potts Jr., the owner of Fiduciary Trust Services, in January 2011 authorized the plan to purchase 80% of the company’s stock for a total of $17.46 million based on a flawed valuation that was $5.9 million higher than fair market value.
That valuation, by ComStock Valuation Advisors, had “fundamental flaws” that Mr. Potts failed to catch, the lawsuit alleges, including overly optimistic corporate growth rates, incorrectly calculated cost of capital, and inappropriate comparisons to companies much larger than the Lewis Center, Ohio-based trucking company, which has $90 million in annual revenue.
The suit seeks to require Fiduciary Trust Services and Mr. Potts to restore all losses suffered by the ESOP, plus interest. The ESOP is named as a defendant, “solely for the purpose of ensuring complete relief,” the lawsuit said.
Triple T Transport Inc., the plan administrator and sponsor, set up the ESOP in January 2010 and hired Mr. Potts and Fiduciary Trust Services in May 2010 as the independent fiduciary for the ESOP transaction, which was 100% leveraged through a loan from the company. After the transaction, the ESOP owned 100% of Triple T stock.
At the time of the ESOP transaction, two former company officers and directors, John Walker and Thomas A. Sanfillipo, owned at least 10% and 50% of the shares, respectively, which represented all of Triple T’s outstanding stock, according to the lawsuit.
Calls to Mr. Potts and Triple T. President Darin Puppel were not returned by press time.