EBSA News Release: [11/29/2012]
Contact Name: Michael Trupo or Jason Surbey
Phone Number: (202) 693-6588 or x4668
Release Number: 12-2341-NAT
US Labor Department sues to recover losses to employee stock ownership plan of Maran Inc.
NEW YORK The U.S. Department of Labor has filed a lawsuit to recover losses suffered by participants in the Maran Inc. Employee Stock Ownership Plan after the plan was allowed to purchase overvalued company stock. The suit names as a defendant First Bankers Trust Services Inc., which was hired as an independent fiduciary and trustee in connection with the company's ESOP to determine whether, and at what price, to purchase shares of Maran Inc. from majority shareholders. The ESOP is also a defendant.
The suit alleges that First Bankers Trust Services violated the Employee Retirement Income Security Act when, in late 2006, it approved the ESOP's purchase of 49 percent of the outstanding stock of Maran Inc. for approximately $71 million, which was more than fair market value. As a result, ESOP participants suffered significant losses.
"ESOP participants depend on the plan to buy and sell sponsor-company stock at fair market value," said Jonathan Kay, regional director of the Labor Department's Employee Benefits Security Administration's New York Regional Office. "The department is committed to making sure that the ones responsible for making these decisions are fulfilling their fiduciary duties to protect the interests of the ESOP participants."
The suit seeks to recover all losses and have First Bankers Trust Services enjoined from serving as a fiduciary to ESOP plans.
Maran Inc. is an apparel company headquartered in Manhattan. The suit was filed in the U.S. District Court for the Southern District of New York and is being litigated by the Plan Benefits Security Division of the department's Office of the Solicitor in Washington, D.C. The suit is based on an investigation conducted by EBSA's New York Regional Office.
Employers and workers can reach EBSA's New York office at 212-607-8600 or toll-free at 866-444-3272 for help with problems related to private sector retirement and health plans. Additional information can be found at http://www.dol.gov/ebsa/.