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News Release

EBSA News Release: [03/13/2015]
Contact Name: Ted Fitzgerald or Andre J. Bowser
Phone Number: (617) 565-2075 or x2074
Email: or
Release Number: 15-0295-NEW

Laser and Skin Surgery of New York ESOP overpays in $24M stock sale, US Labor Department charges in lawsuit

Suit alleges flawed valuation and fiduciary violations by owner and trustee

NEW YORK — Accurate company valuations are critical when it comes to establishing an Employee Stock Ownership Plan. Too often, company owners seek to inflate the price to benefit themselves at the expense of workers. The U.S. Department of Labor alleges that this is what Dr. Roy Geronemus, owner of the Manhattan-based Laser and Skin Surgery Center of New York, and plan trustee Samuel Ginsberg did when they created the Laser Skin and Surgery Center Employee Stock Ownership Plan in 2009.

An investigation by the U.S. Department of Labor's Employee Benefits Security Administration found that the valuation process was flawed, and the ESOP's subsequent $24 million purchase of the stock violated the Employee Retirement Income Security Act.

As a result of these breaches, the department has sued Ginsberg and Geronemus in federal court. The department's complaint, filed with the U.S. District Court for the Southern District of New York, seeks to have the defendants restore all losses to the ESOP; have Geronemus disgorge any and all ESOP assets and profits earned by him as a result; require the defendants to undo the prohibited transactions; and bar the defendants from serving as fiduciaries or service providers to any ERISA-covered plans.

The department's lawsuit says Geronemus appointed Ginsberg, his personal accountant, as the ESOP's trustee for the sale of Dr. Geronemus' stock to the ESOP. Ginsberg retained Trenwith Valuation LLC, which valued the company at $48 million, including $24 million for the 400,480 shares sold to the employees. This valuation had several obvious errors. 

First, the company's valuation was flawed because it relied on data that inflated its value, namely a projection that Geronemus would earn only $663,439 in compensation annually when, in fact, he had and would continue to receive $1 million to $3 million annually. This made the company's operating costs seem lower than they  were. Ginsberg and Geronemus knew, the lawsuit alleges, that Geronemus would make significantly more than $663,439 each year.

Trenwith also valued the company by comparing it to allegedly similar companies. However, five of the 12 companies that Trenwith used for the comparison were based in Europe and listed on European stock exchanges exclusively. They were not appropriate examples to use and were likely chosen to inflate the value of the company.

"As a result of the defendants' actions, the ESOP significantly overpaid for the stock. These were open and obvious flaws that the defendants knew or should have known, which resulted in a financial loss for the plan and its participants," said Jonathan Kay, EBSA's regional director in New York. "In addition, the defendants breached their fiduciary duties under ERISA by allowing the ESOP to engage in the prohibited transaction. They must now make restitution of millions of dollars to the plan and its participants."

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 relating to private-sector retirement and health plans. In fiscal year 2014, EBSA recovered $599.7 million in direct payments to employee benefit plans, participants and beneficiaries. Additional information can be found at