Company and CEO Ordered to Pay $1.3 Million to Employees' Retirement Fund and as Penalties for Prohibited Stock Transactions

 
Wednesday, February 3, 2016
 

The U.S. Department of Labor’s Employee Benefits Security Administration conducted an investigation into Gruber Systems Inc. Employee Stock Ownership Plan and John Hoskinson, an individual.  The department filed a complaint on May 29 alleging that the defendants caused the company’s employee stock ownership plan to purchase company stock for significantly more than fair market value, resulting in losses to plan participants.

The suit alleged the money should have been set aside to fund the retirement accounts of Gruber retirees, but was steered into stock purchases to fund the financially distressed company. The suit sought a reversal of the prohibited stock transactions, the restoration of any related plan losses, and a court order requiring the defendants to account for and restore losses to plan participants. Additionally, the department sought to permanently enjoin Hoskinson, Gruber’s CEO, from serving as a fiduciary or service provider to any plan covered by the Employee Retirement Income Security Act, his removal from any positions as a plan fiduciary, and the appointment of an independent fiduciary to distribute the plan’s assets.

The court issued a judgment and order permanently enjoining the defendants from engaging in any further violations of the Employee Retirement Income Security Act and permanently barring them from serving as a fiduciary or service provider to any ERISA-covered employee benefit plan. Valencia, California-based Gruber Systems, and CEO Hoskinson, have been ordered to return $1.1 million to the company’s employee stock ownership plan for the losses. The judgment also requires Gruber Systems and Hoskinson to pay $220,000 in civil money penalties and orders the newly-appointed plan trustees to distribute the plan’s assets to the participants and beneficiaries, and terminate the Plan.

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