Vick Advisers Barred from ERISA Plans

December 28, 2009 (PLANSPONSOR.com) – Michael Vick’s former financial advisers won’t be working with ERISA plans anymore.

The U.S. Department of Labor has obtained a consent judgment barring the purported financial advisor to National Football League (NFL) player Michael D. Vick and his company, MV7 LLC, from serving in a fiduciary capacity to any employee benefit plan governed by the Employee Retirement Income Security Act (ERISA). 

The department sued financial advisors Mary Wong and David Talbot for allegedly participating in some of the prohibited transfers from a pension plan sponsored by one of Vick’s companies. Vick, who earlier agreed to a consent judgment (seeVick Agrees to $400K Settlement of DoL Charges), was alleged to have made prohibited transfers from the plan for his own benefit. The plan’s assets allegedly were partially used to help pay Vick’s criminal restitution after his conviction for unlawful dog fighting and to help pay his attorney in his bankruptcy cases. Vick filed for Chapter 11 bankruptcy on July 7, 2008 (see Michael Vick Sued for Prohibited Pension Transfers). 

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According to the DoL, the judgment permanently bars Wong from serving in a fiduciary capacity to any plan governed by ERISA. In a separate court judgment, Talbot was ordered to restore $369,431.71 to the plan and was barred from serving in a fiduciary capacity to any plan in the future. 

“Fiduciaries have a duty to protect the pension assets of participants,” said Phyllis C. Borzi, assistant secretary for the Labor Department’s Employee Benefits Security Administration (EBSA). “Our legal action ensures that this advisor will never deal with the assets of employee benefit plans in the future.” 

MV7 LLC was a celebrity marketing enterprise owned by Vick. The company sponsored a defined benefit retirement plan for nine current and former employees as of October 2008, the latest data available. 

ESOPs Get Legislative Backing

December 24, 2009 (PLANSPONSOR.com) – Employee stock ownership plan (ESOP) proponents got some legislative backing last week.

Two pieces of legislation have been introduced, both sponsored by Senator Bernard Sanders [I-Vermont], and co-sponsored by Senators Sherrod Brown [D-Ohio], Patrick J. Leahy [D-Vermont], and Robert Menendez [D-New Jersey].  The first bill, the `Worker Ownership, Readiness and Knowledge Act’ (the `WORK Act’), S. 2909, is “to provide state programs to encourage employee ownership and participation in business decision making throughout the United States”. 

The second, S. 2914, would provide for the establishment of the United States Employee Ownership Bank.

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Office of Employee Ownership and Participation 

The “WORK” Act calls for the Secretary of Labor to establish within the Department of Labor an Office of Employee Ownership and Participation to promote employee ownership and employee participation in business decisionmaking.   

This office, and its Director of Employee Ownership and Participation, is called on to support, within the individual 50 states, existing programs designed to promote employee ownership and employee participation in business decisionmaking; and to facilitate new such programs at the state level.  The bill says that support will come in the form of Federal grants, as well as the acting as a clearinghouse on techniques employed by new programs and existing programs within the States, and disseminating information relating to those techniques to the programs, or funding projects for information gathering on those techniques, and dissemination of that information to the programs, by groups outside the Office. 

The bill also calls for the facilitation of the formation of new programs, “in ways that include holding or funding an annual conference of representatives from States with existing programs, representatives from States developing new programs, and representatives from States without existing programs”. 

A New Program

Additionally, not later than 180 days after the date of enactment of the law, the Secretary of Labor is directed to establish a program “to encourage new and existing programs within the States, designed to foster employee ownership and employee participation in business decisionmaking throughout the United States”.  That program is to provide education and outreach to inform employees and employers about the possibilities and benefits of employee ownership, business ownership succession planning, and employee participation in business decisionmaking, including providing information about financial education, employee teams, open-book management, and “other tools that enable employees to share ideas and information about how their businesses can succeed.” 

The program is also charged with providing technical assistance to assist employee efforts to become business owners, to enable employers and employees to explore and assess the feasibility of transferring full or partial ownership to employees, and to encourage employees and employers to start new employee-owned businesses, and to train employees and employers with respect to methods of employee participation in open-book management, work teams, committees, and other approaches for seeking greater employee input; as well as training other entities to apply for funding under this legislation, to establish new programs, and to carry out program activities.

“We are, needless to say, excited that Senator Sanders and three colleagues have put forward these two bills,” said J. Michael Keeling, president of The ESOP Association, in a press release.  “S. 2909 seeks to expand programs that several states have established to help business owners create employee-owned companies.  S. 2914 is a bold new approach proposing, for the first time, a Federal loan guarantee program to save jobs in certain situations when the result of the financing would be a company owned 50% or more by the employees.”

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