The U.S. Department of Labor has filed suit against San Francisco's Pacific Bank, alleging the bank, its CEO and three additional fiduciaries of its Employee Stock Ownership Plan mismanaged plan assets potentially resulting in $1.4 million in plan losses.
The government alleges that when the Pacific Bank fiduciaries terminated the ESOP in 2010, they failed to distribute plan assets in cash as required under the Employee Retirement Income Security Act. Instead, the ESOP participants were stuck with company stock, which the complaint alleges was difficult — if not impossible — to liquidate for cash.
Government investigators found participants would have received nearly $1.24 million had the stock been liquidated at the time of termination, using December 2009 assessed values. Instead, the complaint alleges that in 2011, $81,407 was improperly diverted to California Pacific Bank as well as an additional nearly $70,000 diverted in 2012. Finally, investigators allege the bank held onto plan assets in non-interest accruing bank accounts where the funds were available for bank use without charge and without earning interest on the plan funds.
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