Never miss a story — sign up for PLANSPONSOR newsletters to keep up on the latest retirement plan benefits news.
Compliance January 2, 2020
Wilmington Trust Agrees to Settle ESOP Lawsuit
It has agreed to pay $5 million into a settlement fund.
Reported by Rebecca Moore
Wilmington Trust is agreeing to settle a lawsuit alleging the firm caused and engaged in prohibited transactions under the Employee Retirement Income Security Act (ERISA) related to a sale of ISCO Industries’ stock to participants in its employee stock ownership plan (ESOP).
According to the original complaint, on December 20, 2012, ISCO and/or its prior owner(s) sold 4 million shares of common stock in the company to the ESOP in exchange for a 25-year note of $98 million, accruing 2.4% annual interest. As of December 31, 2012, the ISCO shares purchased by the ESOP were revalued by an independent appraiser at $39 million—a decrease of more than 60%.
The motion for preliminary approval of the settlement agreement says, “Wilmington Trust denies these allegations; denies any wrongdoing or liability; and has vigorously defended itself in this action. Wilmington Trust does not admit wrongdoing of any kind regarding the ESOP Transaction or this action.”
Nevertheless, Wilmington Trust has agreed to pay $5 million into a settlement fund. The court document argues that “a settlement of $5,000,000—approximately $12,000 per participant before fees and other costs are applied—is a good result for the Class.” However, it also says the funds remaining after deduction from the settlement amount for taxes (or reserves to pay taxes), settlement administration fees, court-approved attorneys’ fees or expenses, and any service awards to the class representatives are what will be distributed to the class members.
The motion cites as one reason for settlement “probable costs, in both time and money, of continued litigation.” The case has continued since a recommended decision was made in August 2017 that favored Wilmington Trust. Chief U.S. Magistrate Judge Mary Pat Thynge of the U.S. District Court for the District of Delaware found that the plaintiffs lack standing for subject matter jurisdiction because they did not allege an economic injury. Thynge’s recommendation allowed for the parties to serve and file specific written objections within 14 days after being given a copy of her report. A review of the docket for the case shows those were filed, as well as many other motions over the more than two years since.
A trial for the case was set for May 11, 2020.