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DOL ESOP Lawsuit Settlement

The DOL filed this lawsuit against Sonnax Industries Inc. executives and the Sonnax Plan’s trustee, First Banker Trust Services Inc. The DOL claimed that Sonnax employees paid the two executives $48.8 million to acquire all of the company’s stock on the basis of a “deficient investigation” which overinflated the Sonnax stock price, causing the Plan to take on significant debt, while profiting the two executives. Proposed settlement has been reached in the case, pending court approval, with Sonnax executives paying $2 million to the ESOP, and First Bankers Trust Services Inc. paying $225,000 for its role in negotiating the stock sale. Of note, the DOL and First Bankers have settled similar lawsuits in which First Bankers Trust overvalued stock for its clients. First Bankers suspended services for newly established ESOPs in 2017 amidst various similar cases, all settled out of court with the First Banker paying. The Sonnax settlement also involves civil penalties, with the executives scheduled to pay $200,000 and First Bankers, $25,000.

www. planadviser.com; April 30, 2018.
www.news.bloomberglaw.com; April 30, 2018.