The U.S. Department of Labor said the previous trustee of Minneapolis-based Kurt Manufacturing's employee stock ownership plan overpaid $9.3 million for shares of the company a decade ago.
As a result, the U.S. District Court for Minnesota ordered Reliance Trust Co. to restore $8.4 million to the Kurt Manufacturing ESOP plan and penalized Reliance Trust $840,909.
The Labor Department's Employee Benefits Security Administration (EBSA) alleged that Reliance Trust, the ESOP's previous trustee, overpaid when it spent $39 million for the remaining shares of Kurt Manufacturing company back in October 2011.
"This settlement restores employees' hard-earned retirement funds ... and ensures executives responsible for the overpriced purchase of stock receive no future benefits from their decision," Mark Underwood, EBSA's acting regional director, who works out of Kansas City, said in a statement.
The federal court also ordered board members of Kurt Manufacturing, whose duties included responsibilities for the ESOP, to restore $984,042. The board members and senior executives of the company Steven Carlsen, Paul Lillyblad and Kelli Watson also were ordered to pay a $215,957 penalty.
"The board members failed to monitor Reliance's determination of the stock's value and allowed the company to purchase it for more than its true value," according to a Labor Department news release.
In addition to the fine, Carlsen, Lillyblad and Watson also agreed to "not participate in the Kurt's stock appreciation rights plan; forego their right as of July 1, 2021, to any future contributions from Kurt to the supplemental executive retirement plan; and rescind agreements that provided termination severance payments of their contract salaries for two years. "
The court also barred Watson, the company's chief administrative officer, and Lillyblad, its chief financial officer, from serving as fiduciaries of the ESOP in the future. Carlsen, the company's president, also is barred from serving as a fiduciary to most company retirement plans.
