Wilmington Trust has agreed to pay a combined $80 million to 21 employee stock ownership plans for which it served as trustee, resolving multiple lawsuits and Employee Benefits Security Administration investigations that found violations of the Employee Retirement Income Security Act.
The Delaware-based bank and trust company will also pay $8 million to the federal government and reimburse plan sponsors of ESOPs for legal costs and expenses advanced in connection with the investigations and litigation, Labor Secretary Eugene Scalia said Thursday.
EBSA investigations found that Wilmington caused losses to the ESOPs when it authorized them to pay more than fair market value for privately held employer stock.
A Labor Department representative could not immediately be reached to provide further details.
Wilmington agreed to settle EBSA's claims without admitting or denying the allegations, the Labor Department said in a news release.
The agreement resolves three lawsuits brought by the Mr. Scalia and 18 investigations by EBSA. The agreement is expected to result in payments to some 5,000 participants in those plans, the Labor Department said.
"An employee stock ownership plan's promise of retirement income for workers depends on paying a fair price for an employer's stock, and fiduciaries hired to represent an ESOP must satisfy their responsibilities to prevent them from paying more," said Preston Rutledge, assistant secretary of labor for EBSA, in the news release. "The department's actions here reflect its commitment to protecting the retirement income of ESOP participants, and holding accountable fiduciaries who fail to satisfy their obligations."
The three lawsuits involved the ESOPs sponsored by Graphite Sales Inc., HCMC Legal Inc. and Stargate Apparel Inc.
The investigations involved the ESOPs sponsored by A.H. Schreiber Co.; Evy of California Inc.; Ram 1971 Inc.; Axia Consulting Inc.; FST Logistics Inc.; The Retina Institute; Best Restaurant Equipment and Design Inc.; Henny Penny Corp.; Sterling Staffing Inc.; Cohen Ventures Inc.; Life's Abundance Inc.; Trius Inc.; Consolidated Bus Transit Inc.; Mapsys Inc.; The Vertex Companies Inc.; Cost Containment Group Inc.; Paramount Marketing Consultants Inc.; West-Camp Press Inc.
"Companies acting on behalf of retirement plan participants must always act in good faith and in the best interest of their employees," Solicitor of Labor Kate S. O'Scannlain said in the news release. "When they breach that obligation, they put their employees' financial security in jeopardy, and will face legal action."
A Wilmington representative could not immediately be reached for comment.
Separately, Wilmington recently agreed to pay $19.5 million to settle an ERISA class-action lawsuit filed against the company by participants in the Martin Resource Management Corp. ESOP Plan. Wilmington denied the allegations or any wrongdoing.
