ERISA at 45: ESOPs

In our fourth installment of ERISA at 45, Sarah Bassler Millar, Chicago partner and Chair of Drinker Biddle’s Employee Benefits and Executive Compensation Group, interviews Los Angeles partner Jeremy Pelphrey regarding the DOL’s focus on the fiduciary process in ESOP transactions and administration, current trends in ESOP transactions, and the positive implications of ESOPs for employee-owners.

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A Lesson in ESOP Transactions: Do Your Diligence and Don’t Ignore Red Flags

In Pizzella v. Vinoskey, the U.S. District Court for the Western District of Virginia held that an independent fiduciary hired to represent the interests of participants in an employee stock ownership plan (the ESOP) engaged in a prohibited transaction and breached its fiduciary duties of prudence and loyalty in a $21 million transaction involving the ESOP’s purchase of stock from one of the company’s founders. The ESOP was awarded a $6.5 million judgment based on the amount that the Court determined the ESOP had overpaid for the stock. The Court held that the founder and independent fiduciary were jointly and severally liable for this judgment.

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