Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
First Bankers Trust Services is suspending its services for transactions related to newly formed employee stock ownership plans, according to a letter from the company’s president obtained by Bloomberg BNA.
The May 8 letter comes about a month after the company was hit with a $9.5 million judgment in a Department of Labor lawsuit challenging its role in a stock transaction for New Jersey construction company SJP Group Inc. The letter, signed by First Bankers President Brian Ippensen, cites the “recent SJP litigation” as a factor driving the company’s decision to halt its services for new ESOP transactions.
“These are certainly unsettling times for ESOP fiduciaries and the community as a whole,” Ippensen wrote in the one-page letter.
First Bankers’ publicly traded parent company, First Bankers Trustshares, Inc., told shareholders on April 28 that if the trust company loses its appeal in this case, earnings could be impacted by up to 37 cents a share.
In addition to the SJP litigation, the trust company is also facing DOL lawsuits over its involvement in stock plan deals for auto parts manufacturer Sonnax Industries Inc., denim maker Maran Inc. and metal manufacturer Rembar Co. In each case, the trust company is accused of facilitating stock purchases based on flawed valuations that caused workers to overpay for the stock of their employers.
The trust company will continue servicing its existing clients and accepting “successor trustee relationships” with ESOP companies that aren’t currently clients, according to Ippensen’s letter.
Ippensen confirmed to Bloomberg BNA that First Bankers will suspend its services for newly formed ESOPs. He declined to comment further on the company’s decision, other than to say that First Bankers has striven to follow the limited guidance on ESOP transactions that the Department of Labor has issued.
First Bankers isn’t the only ESOP fiduciary to be plagued by litigation. In recent months, the department has filed enforcement actions targeting Evolve Bank & Trust, Fiduciary Trust Services Inc. and Lubbock National Bank. A DOL lawsuit against GreatBanc Trust Co. settled for more than $5 million in 2014, and the department reached a $1.25 million settlement with PBI Bank Inc. in a similar action in 2015.
The DOL is intent on eliminating ESOPs altogether, J. Michael Keeling, president of the Washington-based ESOP Association, told Bloomberg BNA via email.
“I can’t comment specifically on a case with which I am not fully familiar,” Keeling said of the First Bankers decision. “But, in general, it appears the Department of Labor’s intent is to shut down prominent ERISA advisory firms and trustee companies in order to eliminate ESOPs.”
Keeling added that the DOL has been advancing legal theories that would “constitute the death knell of ESOPs” if they’re accepted by the courts.
A DOL spokesman declined to comment for this story.
To contact the editor responsible for this story: Jo-el J. Meyer at email@example.com
Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)