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Is There a Problem with ESOPs? Recent Litigation and Enforcement Efforts

Product Code - LGA191
Speaker(s): Alton L. Gwaltney III, Moore & Van Allen PLLC; R. Joseph Barton, Cohen Milstein Sellers & Toll PLLC; Frank Brown, Willamette Management Associates
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There are estimated to be 12,000 ESOPs and other ERISA plans invested primarily in employer stock and valued collectively at in excess of $850 billion. Despite the fact that many ESOPs have provided a huge retirement benefit to the plans’ participants, ESOPs remain the target of increasing enforcement efforts by the U.S. Department of Labor and the private bar. Is there a problem with ESOPs or is something else serving as a catalyst for these actions?

The faculty for this program will discuss whether ESOPs are well-kept secrets subject to unfair, unknowledgeable, and over-burdensome scrutiny or whether they are abusive and risky tools wielded by inherently and intractably conflicted financiers or misguided owners. They will address a variety of current ESOP issues such as the recent increase in the number of ESOP-related litigations and the underlying factors leading to litigation, including significant decreases in ESOP company stock prices due to the economic downturn, apparent closer scrutiny of ESOPs by the DOL, and successful outcomes in a number of class actions and DOL enforcement cases involving ESOPs. Also discussed will be the developing trends in ESOP litigation, including “hot button” legal, valuation, and fiduciary issues that can come up during ESOP audits, DOL investigations, and litigation.

Educational Objectives:

• Understand employment-related agreements with sellers, including executive and deferred compensation.
• Learn to evaluate the reasonableness of management projections.
• Discover ESOP seller financing valuation: face versus FMV.
• Find out about multi-investor and multi-stage redemption transactions.
• Understand fairness and solvency.
• Understand the effect of subsequent sales.
• Understand what it means to be a comparable company.
• Discover if there are “non-traditional” ESOP valuation methods worth considering.
• Understand “appointing” fiduciary liability.
• Learn about the indemnification of ESOP fiduciaries.

Who would most benefit from attending this program?

Legal practitioners involved in ESOP structuring, administration, and litigation, business appraisers, investment bankers, ESOP plan sponsors, and ESOP fiduciaries will benefit from attending this program, which will offer analysis of cutting edge litigation issues effecting ESOPs and ERISA plans holding employer stock.

Program Level: Advanced.

Alton L. Gwaltney III, Moore & Van Allen PLLC; R. Joseph Barton, Cohen Milstein Sellers & Toll PLLC; Frank Brown, Willamette Management Associates

Alton L. Gwaltney III, Moore & Van Allen PLLC
Larry Gwaltney is a member at Moore & Van Allen. He routinely represents ERISA plan sponsors and fiduciaries across the nation in disputes involving a variety of ERISA plans, including Employee Stock Ownership Plans. He is a sought-after speaker on ESOP issues, including fiduciary obligations, the Department of Labor’s current enforcement actions, and litigation trends. Mr. Gwaltney is an active participant and lecturer for the National Center for Employee Ownership and serves as a member of the ESOP Association’s Advisory Committee on Legislative and Regulatory Issues.

Mr. Gwaltney earned a J.D. from the University of Richmond and a B.A. from Hampden-Sydney College. He is licensed to practice in Virginia and North Carolina.

R. Joseph Barton, Cohen Milstein Sellers & Toll PLLC
Joe Barton is a partner with Cohen Milstein. He has been representing classes of plaintiffs in employee benefits cases since completing his clerkship with the Honorable Lenore C. Nesbitt, United States District Judge for the Southern District of Florida. He has represented clients alleging fiduciary misconduct involving the purchase and holding of publicly-traded and privately-held employer stock in retirement plans, and most recently was lead trial attorney successfully challenging transactions involving the ESOP plans of two large companies. Mr. Barton is an active participant and speaker for the ABA Employee Benefits Committee.

Mr. Barton earned both a J.D. and a B.A. from the College of William & Mary. He is licensed to practice in California and the District of Columbia.

Frank Brown, Willamette Management Associates
Chip Brown, Managing Director at Willamette, regularly provides valuation and transaction advisor opinion services related to ESOP sponsor companies. He typically works with the tax advisers, legal advisers, and trustees for these ESOP sponsor companies. In addition, he has provided forensic and dispute advisory services for ESOP and ERISA matters in the U.S. District Court. Chip is a certified public accountant (CPA) and he holds the chartered financial analyst (CFA) designation. He is also accredited in business valuation (ABV) and certified in financial forensics (CFF) by the American Institute of Certified Public Accountants (AICPA).

Mr. Brown earned a master of science in accounting from the University of Virginia and a bachelor of science in management from the Georgia Institute of Technology.

This program’s CLE-credit eligibility varies by state. Bloomberg BNA is an accredited provider in the states of New York*, California, Pennsylvania, Texas and Virginia, and most other jurisdictions grant CLE credit on a per-program basis. At this time, Bloomberg BNA does not apply directly to the states of Florida, Rhode Island, Montana and Hawaii although credit is usually available for attorneys who wish to apply individually. Additionally, the following states currently do not grant credit for Bloomberg BNA OnDemand programming: Arkansas, Ohio, Nebraska, and Delaware. All requests are subject to approval once the live webinar has taken place or the customer has viewed the OnDemand version. Please contact the Bloomberg BNA accreditations desk if you have specific questions that have not been addressed.

If you have further questions regarding a specific state or how to file for CLE credit, please contact Bloomberg BNA customer service at 800-372-1033 and ask to speak to the CLE Accreditation Coordinator.

Hardship Policy
For information regarding Bloomberg BNA’s Hardship Policy, please visit the Continuing Education Information page.

For more information about Mandatory or Minimum Continuing Legal Education (MCLE) requirements, visit the American Bar Association website at

*Bloomberg BNA is an accredited provider in New York for experienced attorneys only.