Wilmington Trust Sued Over Martin Resource Stock Plan Deal

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

Wilmington Trust is in the crosshairs of another lawsuit challenging its role in a company’s decision to transfer corporate ownership to its workers through an employee stock ownership plan ( Guidry v. Wilmington Tr., N.A. , D. Del., No. 1:17-cv-00250, complaint filed 3/10/17 ).

The proposed class action, filed March 10 by a former employee of Texas oil transporter Martin Resource Management Corp., accuses Wilmington of orchestrating a transaction that allowed Martin shareholders to unload their stock at inflated prices by transferring it to an ESOP established as a retirement savings vehicle for Martin employees. Through the ESOP, the Martin workers overpaid for the company’s stock by more than $185 million, the lawsuit claims.

Wilmington, a subsidiary of M&T Bank, is no stranger to litigation over ESOP transactions. The company went to trial in 2016 over allegations it mishandled an $81 million deal involving the ESOP connected to government security contractor Constellis Group Inc. Wilmington was sued in January over its role in a $98 million stock deal involving the ESOP of piping distributor ISCO Industries Inc.

In this case, the employee claims the ESOP paid more than $375 million for stock that gave it a controlling interest in Martin. Shortly after the transaction closed, that stock was valued at about $190 million by an independent appraiser, the lawsuit claims.

Moreover, the ESOP paid a “control premium” on the stock—a higher price that accounts for obtaining a majority interest in a corporation—without actually obtaining control over Martin’s board of directors, the lawsuit alleges.

The lawsuit was filed in the U.S. District Court for the District of Delaware by Bailey & Glasser LLP, which also represents the workers suing Wilmington over the ISCO and Constellis stock plans.

Wilmington didn’t respond to Bloomberg BNA’s request for comment.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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