The DOL filed a lawsuit, Perez v. PBI Bank Inc. (civil action number: 3:13-cv-1400-PPS), on behalf of the participants of the Miller’s Health Systems, Inc., ESOP. Miller’s Health is a company that manages long-term care and assisted-living facilities.

In the suit, the DOL alleges that PBI Bank, Inc., the trustee of the plan, authorized the purchase of company stock for $40 million, an amount far in excess of the fair market value of the stock. It is also alleged that PBI Bank approved financing for the transaction at an excessive interest rate.

An investigation by the DOL’s Employee Benefits Security Administration (EBSA) focused on a September 2007 stock purchase. The suit alleges that PBI Bank, Inc. violated the Employee Retirement Income Security Act (ERISA) by imprudently and disloyally approving the purchase of stock by the plan. The suit seeks to require PBI Bank, Inc. to restore all losses suffered by the ESOP, plus interest.

At the time of the stock purchase, Miller’s Health managed 31 long-term care facilities under the name of Miller’s Mary Manor and 10 assisted living facilities under the name Miller’s Senior Living. Miller’s Health also operated Theracare, Inc., an Indiana corporation that provides physical and occupational therapy and speech-language pathology to residents in Miller’s Health facilities.

After the EBSA investigation, the DOL concluded that, as a result of the design of the transaction and the fiduciary breaches of PBI Bank, Inc., the stock purchase was not made for the primary benefit of participants and did not promote employee ownership in Miller’s Health. As such, the DOL deemed PBI Bank, Inc. as being responsible and liable for ERISA violations.

The suit also seeks to remove PBI Bank, Inc. as a fiduciary and service provider of the plan and to permanently bar it from serving as a fiduciary or service provider to ERISA-covered plans in the future.

According to the DOL, the ESOP had 2,939 participants and assets of $12,848,000 as of September 30, 2012.