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The Labor Department reached a $5.5 million deal in a dispute with a New York skin doctor who allegedly caused his practice’s employee stock ownership plan to buy its stock above its fair market value ( Acosta v. Ginsberg , S.D.N.Y., No. 1:15-cv-00985, proposed consent order and judgment 7/21/17 ).
If approved, the settlement will end a two-year dispute involving the DOL; Dr. Roy G. Geronemus, who owned the Laser and Skin Surgery Center of New York; and his accountant Samuel Ginsberg, who was the ESOP trustee. Under the settlement, Geronemus agreed to make a one-time cash payment of $5 million to the ESOP and pay a penalty of $500,000 to the DOL, according to court documents filed by the agency on July 21.
The dispute stems from the doctor’s 2009 sale of about 50 percent of the company’s shares to the ESOP for $24 million, according to the DOL’s lawsuit. Ginsberg and Geronemus were accused of breaching their fiduciary duties under the Employee Retirement Income Security Act while acting as fiduciaries of the plan, the lawsuit, filed in the U.S. District Court for the Southern District of New York, alleges.
Under the deal, Geronemus also agreed to collect, prospectively, no more than $663,439 in total compensation per calendar year from two of his practices, the agency said. The compensation limit will end in the event that the ESOP no longer owns shares of the company.
In 2015, Geronemus executed a waiver releasing and disclaiming any right to be paid any portion of the approximately $5.4 million that was reflected as a loan payable to him on the financial statements of the company from 2008 to 2014, the agency said.
Geronemus and Ginsberg are also permanently prohibited and restrained from serving as fiduciaries to any ERISA-covered employee benefit plan.
The DOL’s Office of the Solicitor and the Securities and Exchange Commission represented the department. Frankfurt Kurnit Klein & Selz PC represented Ginsberg. Morrison Cohen LLP represented Geronemus.
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Text of the proposed consent order is at http://www.bloomberglaw.com/public/document/Perez_v_Ginsberg_et_al_Docket_No_115cv00985_SDNY_Feb_11_2015_Cour/3?doc_id=X1Q6NSQPMM82&imagename=104-2.pdf.
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