Participants in ISCO Industries’ employee stock ownership plan agreed to settle their class-action lawsuit against Wilmington Trust, the plan’s trustee, for $5 million, according to a motion filed Dec. 23 in U.S. District Court in Wilmington, Del.
The plaintiffs, Scott J. Swain and Kenny Fiorito, alleged that Wilmington Trust violated ERISA’s prohibited transaction rules when it authorized the plan to buy shares of Louisville, Ky.-based ISCO for more than fair market value. The plan purchased 4 million shares of ISCO common stock on Dec. 20, 2012, for $98 million, according to the court filing.
The plaintiffs claimed in their settlement motion that Wilmington Trust acted “for the benefit of ISCO and the shareholders that sold to or redeemed their shares with ISCO prior to the ESOP transaction by approving a purchase price for ISCO stock that exceeded its fair market value.” They also criticized Wilmington Trust for allegedly borrowing money from ISCO. The plaintiffs filed the original complaint on behalf of the ISCO plan and similarly situated plan participants on Jan. 25, 2017.
Wilmington denied the allegations and any wrongdoing, according to the court filing. “We are pleased to resolve the claims in this case and avoid what could have been a protracted and expensive legal proceeding,” a spokeswoman for Wilmington Trust said in a statement. “While we deny all allegations with respect to these claims, we feel that this settlement is the best way for all parties to move forward. As always, we believe we have acted in accordance with all applicable laws, industry best practices and will continue to carry out our legacy and commitment to quality client services.”
As part of the preliminary settlement, Wilmington Trust will pay $5 million into a settlement fund. The funds remaining after paying taxes, settlement administration and court-approved attorneys’ fees, and other expenses will be distributed to class members according to a plan of allocation.
The proposed settlement requires final court approval. In addition to asking the court to grant preliminary approval of the settlement agreement, the plaintiffs requested, among other things, a date for a fairness hearing and the approval of the proposed class notice and plan of allocation.