SITUATION:Members of an ESOP allege breach of fiduciary duty against the plan’s trustees who also happen to be D&Os of the company. It is alleged that the ESOP was damaged by these D&O trustees paying themselves excessive bonuses in the hundreds of thousands annually over a number of years thus preventing the stock value from rising. Though it was argued that the D&Os were acting under the business judgment ruling in managing the company rather than as trustees/fiduciaries of the plan when awarding the bonuses, the matter resolved for about $2.5 million and other non-monetary relief.
OUTCOME: Though the $2.5 million settlement wasn’t covered, defense fees exceeded $600k.
SITUATION: The plan fiduciaries for a 401(k) Plan received a letter from DOL advising them that after an extensive investigation it appears that they have violated several provisions of ERISA. The DOL alleges the plan fiduciaries: did not forward amounts withheld from employees on a timely basis; improperly allowed the plan to make loans to shareholder- employees; make delinquent employer contributions to the plan; failed to make timely distributions to terminated employees; and filed Annual 5500 Reports which falsely indicated that the plan was funded in accordance with the minimum funding requirements of ERISA.
OUTCOME: Total defense costs and settlement exceeded $250,000.
SITUATION: A particular state department of labor advises a company that it may commence a lawsuit against it for the funds that it allegedly lost from its 401(k) Plan. The company reportedly transferred the funds from a 401(k) plan managed by one company to another.
OUTCOME:This situation settled without a lawsuit being brought against the company, but the defense costs exceeded $25,000.
SITUATION: Department of Labor brought suit against a company, its CEO, and its COO alleging that both the CEO and COO sold shares to the ESOP for a grossly inflated per share amount due to a fraudulent appraisal that used aggressive projections that were not in line with past performance and improper comparisons to much more successful companies.
OUTCOME:Defense exceeded the $1 million limit of liability.
SITUATION: The trustees of an Employee Stock Ownership Plan (ESOP) were sued by the Department of Labor ( DOL) and company employees who faulted the fiduciaries for making imprudent investment decisions. The court ultimately found the fiduciaries failed to conduct impartial reviews of investment options.
OUTCOME:The suit finally settled for $1,000,000.
