Media Release

Release Date: 12/15/1998)
Release Number: USDL Chicago OPA V-326
Contact Name: Sharon Morrissey
Phone Number: 202.219.8921

St. Paul Corporation Sued By Labor Department For Violating Federal Pension Law

The U.S. Department of Labor filed a lawsuit alleging that a St. Paul corporation inappropriately valued its own common stock held as an investment by one of its two corporate pension plans at book rather than fair market value.

The department’s complaint named Bremer Trust, the National Association (formerly First American Trust Company of Minnesota) and Bremer Financial Services, Inc. for causing the company’s profit sharing plan to buy and sell shares of Bremer Financial Corp. Class A common stock at book value and to value participant account balances in the profit sharing plan at book value on an annual basis.

In its complaint, the Labor Department said that since 1989, Bremer Trust’s employee stock ownership plan (ESOP) and profit sharing plan have held shares of Bremer Financial Corporation Class A common stock as plan investments. Since 1989 the common stock held by the ESOP was valued by an independent appraiser at fair market value while identical common stock held by the profit sharing plan was valued at book value.

According to the department’s lawsuit, the discrepancy between the two valuations should be rectified to comply with the Employee Retirement Income Security Act’s (ERISA). Since the fair market value of the Bremer Class A stock was higher than its book value, as evidenced by the ESOP’s independent appraisal, defendants failed to act in the best interest of the profit sharing plan’s participants and beneficiaries when they valued the profit sharing plan’s stock at its lower book value.

The ESOP had 1,053 participants and assets worth $3,353,217 as of Dec. 31, 1996. The profit sharing plan had 1,179 participants and assets worth $45,916,028 as of Dec. 31, 1996.

The lawsuit seeks to have the defendants repay the profit sharing plan any losses, including interest, resulting from their fiduciary breaches and for them to disgorge any profits resulting from those breaches.

The complaint, filed Dec. 15 in the federal district court in Minneapolis, Minn., is a result of an investigation conducted by the department’s Kansas City Regional Office, Pension and Welfare Benefits Administration, which enforces Title I of ERISA.

(Herman v. Bremer Trust, et al)
Civil Action # 98-CV-2647 ADM/AJB

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