After a 19-day trial, a U.S. District Court Judge in theSouthern District of Mississippi has ordered the fiduciaries ofBruister and Associates Inc. to pay nearly $6.5 million to two ofthe company’s employee stock ownership plans.

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Based in Mississippi, BAI is a privately held subcontractor forDirecTV subscribers. Between December 2002 and December of 2005,Herbert Bruister, the sole owner of the company, sold all of hisstock – $24 million worth — to his employees through two ESOPplans.

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The Department of Labor alleged that Bruister and two other planfiduciaries engaged in prohibited transactions, causing theemployees purchasing the stock to pay an inflated price for sharesbased on flawed valuations.

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Judge Daniel Jordan found that Bruister, his attorney and theother fiduciaries fired an attorney for the plans because his workwas too “thorough,” according to a statement from the DOL.

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Also, and the fiduciaries exercised undue influence over theindependent third-party accounting firm hired to value the shares.The court found that Matthew Donnelly, and his firm, BusinessAppraisal Institute, were not sufficiently independent of Bruister,resulting in the over-valuing of the shares.

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“Plan fiduciaries have an obligation to work solely in theinterest of plan participants,” said Phyllis Borzi, assistantSecretary of Labor and head of the Employee Benefits SecurityAdministration, which oversaw the investigation of BAI.

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“When they fail to do so, the retirement security of workers isput in jeopardy, and we will take action to make plan participantswhole.”

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The court has ordered Bruister, and fiduciaries Amy Smith andJonda Henry, to jointly pay $4.5 million in restitution to theESOPs. Bruister will pay an additional $1.98 million in lostinterest payments to the plan. The Bruister Family LLC will alsopay about $1.25 million in restitution.

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Since 2010, the DOL has recovered more the $241 million in ESOP violations, most of whichinvolved improper valuations, according to a blog post by PhyllisBorzi.

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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.