Federal court orders design firm and CEO to pay $540K to employee benefit plan after US Labor Department investigation finds overpayment for shares
ATLANTA – A federal court judge has ordered TPP Holdings Inc., an Atlanta architecture and interior design firm operating as The Preston Partnership, LLC, and its CEO, Robert N. Preston, to restore $540,658 to TPP’s employee stock ownership plan (ESOP) following an investigation and litigation by the U.S. Department of Labor.
U.S. District Judge Eleanor L. Ross in the Northern District of Georgia issued the September 20, 2022, order after finding that TPP and Preston caused the ESOP to purchase company stock from Preston at an excessive price in two separate transactions in 2006 and 2008, violating the Employee Retirement Income Security Act.
The court determined the total loss to the ESOP to be $350,977 and assessed prejudgment interest of $189,681.
The order follows a February 2022 bench trial before Judge Ross and resolves the department’s lawsuit, which was prompted by an investigation by its Employee Benefits Security Administration. The lawsuit alleged TPP’s and Preston’s actions as fiduciaries violated federal law when they caused the ESOP to overpay for Preston’s stock.
“This court’s order restores funds to eligible employees of the TPP Holdings Inc. Employee Stock Ownership Plan and ensures the fiduciaries responsible for the overpriced purchase of stock are held accountable for their bad-faith decision that harmed the viability of the plan,” said Employee Benefits Security Administration Regional Director Isabel Culver in Atlanta. “The U.S. Department of Labor is committed to ensuring the integrity of employee benefit programs and holding those who violate the law accountable.”
The court found in its order that the valuations establishing the sale price for the company stock purchased by the ESOP in 2006 and 2008 were based on a misrepresentation by TPP and Preston that control of TPP Holdings had been ceded to the ESOP, which improperly increased the stock’s valuations. The court found the stock prices exceeded fair market value at the time of both the 2006 and 2008 transactions.
“A federal court has upheld the Department of Labor’s findings and reinforced that a fiduciary’s primary responsibility is to run the plan solely in the interest of participants and beneficiaries,” said Regional Solicitor of Labor Tremelle Howard in Atlanta. “The department will take all necessary steps, including seeking court action, to hold fiduciaries responsible for prudent plan management.”
Walsh v. Robert N. Preston, TPP Holdings, Inc dba The Preston Partnership, LLC, and TPP Holdings, Inc. Employee Stock Ownership Plan
Court: U.S. District Court for the Northern District of Georgia
Docket Number: 1:14-cv-04122-ELR