Compliance

Another Firm Targeted by DOL Over Inaccurate ESOP Valuations

An Ohio-based transportation and logistics company is accused of overpricing its company stock by nearly $6 million. 

By John Manganaro editors@plansponsor.com | June 28, 2016

The U.S. Department of Labor (DOL) filed a lawsuit to restore nearly $6 million in losses to the Triple T Transport Employee Stock Ownership Plan (ESOP).

Based in Lewis Center, Ohio, the company is accused by DOL of violating  the Employee Retirement Income Security Act (ERISA) by authorizing the plan to purchase 80% of the company’s stock for $17.46 million in January 2011, “an amount at least $5.9 million higher than the stock’s fair market value.”

The complaint alleges that a plan service provider, Fiduciary Trust Services, along with the firm’s ownership, “caused the plan to overpay by, among other things, failing to properly review and recognize the errors in a valuation analysis and fairness opinion provided to the company by ComStock Valuation Advisors Inc.”

According to DOL’s Employee Benefits Security Administration (EBSA) investigation, “ComStock reporting used an unreasonably high long-term growth rate for the company; added an improper control premium; erred in its calculation of the weighted average cost of capital; selected comparable companies that were drastically different from the company; and failed to value warrants for the selling shareholders correctly.”

Based on the ComStock reporting, DOL says Triple T ownership failed to accurately determine the fair market value of their company and arrived at a value $5.9 million more than the actual value.  The suit seeks to require Fiduciary Trust Services Inc. and the company to restore all losses suffered by the ESOP, plus interest.

In a statement to PLANSPONSOR, Fiduciary Trust Services said, "We believe the complaint is without merit, and we intend to defend our position vigorously.”

The lawsuit was filed in U.S. District Court for the South District of Ohio, Eastern Division, under the docket number 2:16-cv-00612

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