The U.S. Department of Labor has filed a lawsuit to recover losses suffered by participants in the Maran Inc. Employee Stock Ownership Plan after the plan was allowed to purchase overvalued company stock.
The ESOP and First Bankers Trust Services Inc. are listed as defendants in the case. First Bankers Trust Services was hired as an independent fiduciary and trustee in connection with the company's ESOP to determine whether, and at what price, to purchase shares of Maran Inc. from majority shareholders.
The suit alleges that First Bankers Trust Services violated the Employee Retirement Income Security Act when, in late 2006, it approved the ESOP's purchase of 49 percent of the outstanding stock of Maran Inc. for about $71 million, which was more than the fair market value. As a result, ESOP participants suffered significant losses.
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"ESOP participants depend on the plan to buy and sell sponsor-company stock at fair market value," said Jonathan Kay, regional director of the Labor Department's Employee Benefits Security Administration's New York Regional Office. "The department is committed to making sure that the ones responsible for making these decisions are fulfilling their fiduciary duties to protect the interests of the ESOP participants."
The suit seeks to recover all losses and have First Bankers Trust Services enjoined from serving as a fiduciary to ESOP plans.
Maran Inc. is an apparel company headquartered in Manhattan.
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