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Compliance September 14, 2005
Azon Corp. to Restore ESOP Money
September 14, 2005 (PLANSPONSOR.com) - Azon Corp.
has agreed to a settlement of $9.35 million for employee
stock ownership plan (ESOP) benefits to participants who say
the company depleted the plan's assets before declaring
bankruptcy.
Reported by Rebecca Moore
According to an article on the Binghamton Press & Sun’s Web site, several employees filed a class action lawsuit in 2002, alleging that an insider stock transaction wiped out the company’s ESOP while earning some corporate insiders $25 million. The employees claimed that plan administrators and trustees violated the Employee Retirement Income Security Act (ERISA) and breached their duties to shareholders by allowing corporate insiders to cash out their own company stock and sell it to Azon’s ESOP at an inflated price.
The employees also claim the 1999 transaction caused the company and the plan to carry more debt than it could handle and eventually contributed to Azon’s bankruptcy in July 2002, the Press & Sun reports.
About 435 plan participants will receive a payment of around $16,000 after the settlement is adjusted for lawyer fees and expenses related to administering the settlement.
Attorneys for the workers say the almost 100% recovery is very unusual for such cases. The plan was appraised at about $10.2 million before the company declared bankruptcy, according to the Web article.