$1,052,613 to be Restored to ESOP for Violations by Plan's Trustee

 
Monday, July 27, 2015
 

A federal court in Indiana has entered an Agreed Order and Judgment requiring PBI Bank Inc. to pay $1,052,613 to the Miller's Health Systems Inc., Employee Stock Ownership Plan to restore alleged losses. The judgment resolves a lawsuit filed by the U.S. Department of Labor against PBI alleging it violated the Employee Retirement Income Security Act when it authorized the purchase of company stock by the ESOP for more than fair market value. During the time of the alleged violations PBI served as the Plan's trustee.

A subsidiary of Porter Bancorp of Louisville, Kentucky, PBI also agreed to be permanently barred from serving as a fiduciary or service provider to any ERISA-covered plans in the future, except in very limited circumstances. The terms of the judgment also require PBI to pay $83,750 to the Warsaw-based Miller's Health Systems and penalties of $113,636 to the department for violating ERISA.

An investigation by the Chicago Regional Office of the department's Employee Benefits Security Administration focused on a September 2007 stock purchase. Investigators found that PBI authorized the purchase of company stock for $40 million, an amount alleged to be in excess of the fair market value of the stock. The department's lawsuit alleged that the stock purchase was not for the primary benefit of participants, which violated ERISA.

As of Sept. 30, 2012, the ESOP had 3,104 participants and assets of $15,758,274. At the time of the stock purchase, Miller's Health managed 31 long-term care facilities under the name of Miller's Mary Manor and 10 assisted living facilities under the name Miller's Senior Living. It also operated Theracare, Inc., an Indiana corporation, which primarily provided physical and occupational therapy and speech-language pathology to residents in Miller's Health facilities.

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