Pension & Benefits Daily™ covers all major legislative, regulatory, legal, and industry developments in the area of employee benefits every business day, focusing on actions by Congress,...
By Jacklyn Wille
Jan. 27 — The owners of a Florida chemical supply wholesaler sold company stock to their employee stock ownership plan at a price that was nearly double fair market value, the Department of Labor alleged in a new lawsuit.
According to the department, David J. Pilger and William M. Pilger relied on a faulty valuation when they sold 100 percent of Commodity Control Corp.'s stock to the ESOP for $9.1 million. In the course of the transaction, the Pilgers failed to meaningfully review the appraiser's conclusions and to ensure the appraiser had accurate and complete financial data, the department alleged.
This move benefited the Pilgers—who were “looking into how to divest themselves of their ownership stake in the Company and exit from the business”—at the expense of the ESOP's 62 participants, the department contended.
Moreover, the Pilgers “lacked understanding” of the mechanics behind the valuation process, which the department said “contained numerous flaws” and “grossly inflated the value of the company's shares.”
Based on these allegations, the department asked the U.S. District Court for the Southern District of Florida to hold the Pilgers liable under the Employee Retirement Income Security Act and order them to restore losses to the company's ESOP.
The complaint was filed Jan. 20.
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