Skip to main content
MENU
Subscribe
  • Login
  • My Account
  • Logout
  • Register For Free
  • Subscribe
  • Topics
    • Alternatives
    • Artificial Intelligence
    • CIOs
    • Consultants
    • Defined Contribution
    • ESG
    • Face to Face
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Partner Content
    • Private Credit
    • Pension Funds
    • Private Equity
    • Real Estate
    • Regulation
    • Special Reports
    • Washington
    • White Papers
  • International
    • U.K.
    • Canada
    • Europe
    • Asia
    • Australia - New Zealand
    • Middle East
    • Latin America
    • Africa
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Influential Women in Institutional Investing 2024
    • Eddy Awards
  • Resource Guides
    • Active Thematic Global Equities
    • Retirement Income
    • Fixed Income
    • Pension Risk Transfer
    • Pooled Employer Plans (PEPs)
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • ESG Investing | Industry Brief
    • Innovation in ESG Investing
    • ESG Rated ETFs
    • Divestment Database
  • Defined Contribution
    • Latest DC News
    • The Plan Sponsor's Guide to Retirement Income
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • DC Plan Design: Improving Participant Outcomes
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Research Center
    • The P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
  • Print
Breadcrumb
  1. Home
  2. COURTS
November 28, 2018 12:00 AM

Paper company sued over ESOP transactions

Margarida Correia
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Getty Images/iStockphoto

    The fiduciary of the Appvion Inc. Retirement Savings and Employee Stock Ownership Plan sued the bankrupt paper company's former management team, its board of directors and a slew of advisers for allegedly inducing employees to take money out of their 401(k) accounts to purchase 100% of the stock of Appvion's parent company, Paperweight Development Corp.

    In a 138-page complaint filed Monday in U.S. District Court in Green Bay, Wis., Grant Lyon — the sole member of Appvion's ESOP administrative committee — accused the defendants of fraudulently persuading employees to buy PDC stock and concealing the stock's true value. As a result, the ESOP and its participants suffered hundreds of millions of dollars in damages, according to the complaint.

    The retirement plan had $188 million as of year-end 2017, according to its most recent Form 5500 filing.

    The lawsuit alleges that Appvion's management and professional advisers inflated the value of PDC stock in each semi-annual appraisal from November 2001, when the stock was purchased, through Appvion's bankruptcy in October 2017 by, among other things, failing to make deductions for material liabilities such as pension and post-retirement-related liabilities of up to $175.5 million. It claims they "sold the scheme to the employees" by telling them that if they came up with at least $100 million, the company could borrow the rest — almost $700 million — to buy PDC's stock.

    The defendants, the lawsuit said, "downplayed the risks and appropriateness of transferring funds from an existing employment retirement plan to a new, highly leveraged undiversified ESOP."

    In the suit, Mr. Lyon berated the company's former CEO and general counsel for representing that its adviser, Houlihan Lokey Howard & Zukin Capital, was independent. Houlihan Lokey's fee was contingent on the deal closing and it was structured as a percentage of the final purchase price, a disclosure the management team did not make, according to the complaint.

    A spokesman for Houlihan Lokey declined to comment on the case.

    In addition to Houlihan Lokey, the lawsuit names State Street Global Advisors, the ESOP's trustee; Willamette Management Associates and Stout Risius Ross, the firms that provided the company's appraisals; and a string of other advisers, along with all the members of the company's senior executive team, board of directors, and ESOP committee.

    "We believe this lawsuit is wholly without merit and intend to vigorously defend," a spokesman for State Street said in an email.

    Stout Risius Ross’ legal department declined to comment. Willamette had no one available to comment.

    The lawsuit blasted the executive team for leaving the company and cashing out their personal investments in PDC stock when Appvion's appraised value was at or near its highest point.

    "These departures, timed to coincide with the fraudulently high stock valuations, caused the ESOP Plan and Appvion to drastically overpay these executives and drained Appvion's critical cash reserves," the lawsuit claims.

    Mr. Lyon learned of the alleged fraudulent appraisals of PDC's stock in August 2017 when he was appointed to replace the entire Appvion ESOP committee, according to the lawsuit.

    Mr. Lyon is seeking to recover damages suffered by the ESOP, including those resulting from the alleged inflated appraisals and stock price and the undisclosed conflict of interests. He also seeks to recover the amounts paid to the management insiders and ESOP fiduciaries who sold their stock at inflated values. In addition, he seeks to recover from management and directors for the waste of Appvion corporate assets when they approved the payment of more than $57 million for the purchase of PDC stock. Lastly, he seeks to recover all fees paid to Houlihan Lokey.

    Related Articles
    Labor Department settles ESOP trustee case with PBI Bank
    Labor Department settles ESOP case with AIT Laboratories
    First Bankers Trust Services to pay $15.75 million to settle 3 ESOP cases with …
    Trump's DOL keeping enforcement pressure steady
    Kruse-Western sued over sale of company stock to ESOP
    Recommended for You
    gavel court justice books 750_i.jpg
    Kaiser Foundation Health Plan wins dismissal of lawsuit over forfeited 401(k) funds
    Outside of Supreme Court building.
    Supreme Court asks for more information about dispute over benchmarks in retirement plan lawsuits
    Gavel on top of a stack of hundred dollar bills.
    Intuit agrees to rare settlement in 401(k) plan forfeiture lawsuit
    OCIO: A Specialized Landscape
    Sponsored Content: OCIO: A Specialized Landscape
    Sponsored
    White Papers
    The State of Lifetime Income Report
    The Next Wave of LDI Evolution
    Retirement security to future income wins, TIAA brings you the latest financial…
    U.S. Public Funds Top Performers: Q2 2024
    Generative AI Investing: Opportunities at a Key Tech Inflection Point
    Research for Institutional Money Management: Advancing Physical Risk Modelling,…
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    October 23, 2023 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Custom Content
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2025. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Artificial Intelligence
      • CIOs
      • Consultants
      • Defined Contribution
      • ESG
      • Face to Face
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Partner Content
      • Private Credit
      • Pension Funds
      • Private Equity
      • Real Estate
      • Regulation
      • Special Reports
      • Washington
      • White Papers
    • International
      • U.K.
      • Canada
      • Europe
      • Asia
      • Australia - New Zealand
      • Middle East
      • Latin America
      • Africa
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Influential Women in Institutional Investing 2024
      • Eddy Awards
    • Resource Guides
      • Active Thematic Global Equities
      • Retirement Income
      • Fixed Income
      • Pension Risk Transfer
      • Pooled Employer Plans (PEPs)
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • ESG Investing | Industry Brief
      • Innovation in ESG Investing
      • ESG Rated ETFs
      • Divestment Database
    • Defined Contribution
      • Latest DC News
      • The Plan Sponsor's Guide to Retirement Income
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • DC Plan Design: Improving Participant Outcomes
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Research Center
      • The P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
    • Print