GreatBanc Trust Co. has settled an ERISA claim brought by theDOL for $5.25 million.

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In 2012, the Labor department claimed that GreatBanc breachedits fiduciary obligations under ERISA in its relationship astrustee to the ESOP of Sierra Aluminum, a Riverside,California-based materials company.

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GreatBanc Trust, of Lisle, Illinois, allegedly allowed theemployees of Sierra Aluminum to purchase shares of the company fromco-founders and top executives for more than fair-market value.

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The lawsuit alleged that GreatBanc failed its fiduciaryobligations to the 385 participants in Sierra’s ESOP by notadequately vetting an appraisal of the company’s value, which wasbased on unrealistically estimated projections of its futureearnings and profitability.

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Specifically, GreatBanc failed to investigate questionableadjustments to financial statements that informed theappraisal.

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“The benefit of this settlement is two-fold: The Sierra Aluminumplan will recoup a significant amount of money, and perhaps moreimportantly, safeguards will be put in place to protect ESOPsinvolved in any future GreatBanc transactions,” Labor SecretaryThomas Perez said in a statement.

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GreatBanc and its fiduciary insurance policies will restore $4.7million to the company’s ESOP plan and will pay nearly ahalf-million dollars in civil penalties.

As part of the settlement, GreatBanc has to implement newsafeguards when it takes on the role of trustee or fiduciary toESOPs with companies that are not publically held, including morethorough vetting of the outside advisor it uses to value companies,the oversight of the valuation and documentation of theprocess.

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Nick Thornton

Nick Thornton is a financial writer covering retirement and health care issues for BenefitsPRO and ALM Media. He greatly enjoys learning from the vast minds in the legal, academic, advisory and money management communities when covering the retirement space. He's also written on international marketing trends, financial institution risk management, defense and energy issues, the restaurant industry in New York City, surfing, cigars, rum, travel, and fishing. When not writing, he's pushing into some land or water.