DOL Finds Fiduciaries Violated ERISA With Stock Purchase

The suit, Perez v. Mueller et al. (Civil Action No.: 2:13-cv-01302), alleges that the fiduciaries of the Omni Resources Employee Stock Ownership Plan authorized the sale of the company’s stock to the plan for $13.7 million, which reportedly far exceeded its fair market value. The sale resulted in personal financial gain to the company owner, Veronica Mueller, who was also a fiduciary to the plan.

An investigation by the Chicago Regional Office of the DOL’s Employee Benefits Security Administration (EBSA) examined a December 2008 employee stock ownership plan (ESOP) stock purchase. The suit names Mueller, who owned 40% of Omni Resources’ stock, and husband Roger Mueller, who founded the company in 1984. The Muellers were the only members of Omni’s board of directors and were also the plan trustees at the time of the transaction. The remaining 60% of the company’s stock was held in a trust for each of their three children. The trusts are also named defendants in the lawsuit because of the stock sold by each.

Milwaukee-based Alpha Investment Consulting Group, which executed the stock purchase agreement as a special fiduciary to the ESOP, has also been named as a defendant in the suit, for failing to protect the interests of the plan. The suit seeks to require the fiduciaries to restore all losses suffered by the ESOP and to require the defendants to restore all profits and financial benefits received by them.

The EBSA investigation found that, as a result of the design of the transactions and the fiduciary breaches of the Muellers and Alpha Investment Consulting Group, the stock purchases were not for the primary benefit of participants and did not promote employee ownership of Omni Resources. As a result, the DOL concluded that the Muellers and Alpha Investment Consulting Group were responsible and liable for violations of the Employee Retirement Income Security Act (ERISA).

The lawsuit also seeks to remove the Muellers and Alpha Investment Consulting Group as fiduciaries and service providers of the ESOP, as well as permanently barring them from serving as fiduciaries or service providers to ERISA-covered plans in the future.

At the time of the 2008 stock sale, Omni Resources employed approximately 212 IT consultants in the Milwaukee area and elsewhere. As of December 31, 2012, the plan had 83 active and 113 total participants and assets of $1,761,490.