ESOP Transactions

Status Investigation

Practice area Employee Benefits / ERISA


Investigation of Purchase and Sale of Employer Stock To and From ESOPs

Cohen Milstein Sellers & Toll PLLC is investigating potential lawsuits concerning overpayment for employer stock by Employee Stock Ownership Plans (“ESOPs”) sponsored by closely held Companies for violations of the federal pension law (ERISA). We are also examining cases involving the sale of ESOP stock to sponsoring employers and corporate insiders at prices that may be less than fair market value. Our goal is to evaluate potential litigation that would restore losses to employees and former employees resulting from the purchase or sale of mispriced employer stock by ESOPS.

ESOPs are vulnerable to abuse. ERISA was designed to assure the security of private retirement plans by requiring diversification of pension investments and outlawing self-dealing by corporate officials who run the plans. But ERISA contains a gaping loophole for the purchase and sale of employer stock by ESOPs dealing with corporate insiders and sponsoring corporations.

The Act allows ESOPs and other defined contribution plans to invest up to 100% of their assets in employer stock. The decision to buy and sell this employer stock may be made by corporate insiders who stand to benefit directly from the transaction. For example, the CEO and principal owner of a closely held corporation may serve as the ESOP’s trustee and cause the ESOP to purchase shares in the corporation from himself or the employer, without necessarily violating the law. To be legal, these transactions must occur at a price that is determined prudently to be fair market value. But there are no safeguards to assure that this takes place, and it can be very difficult for employees to obtain enough information to determine whether the ESOP has been treated fairly.

If you think you may have suffered losses to your retirement savings because your ESOP bought company stock at too high a price or sold too cheaply, we would be interested in looking into your case. If you have information which might assist us in the investigation of such allegations, please contact one of the following persons:

Michelle C. Yau, Esq. –
Daniel R. Sutter, Esq. –
Cohen Milstein Sellers & Toll PLLC
1100 New York Avenue, N.W., Suite 500
Washington, D.C. 20005
Telephone: 888-240-0775 or 202-408-4600