In the News

“Employer Stock Plan Trustee Sued Over $200 Million Transaction,” Bloomberg Law

May 12, 2021

Two former employees of corporate travel company World Travel Inc. filed a lawsuit accusing the trustee of their employee stock ownership plan of mishandling a $200 million stock transaction that allegedly hurt workers’ retirement savings, according to a proposed class action filed in the Eastern District of Pennsylvania.

The lawsuit, filed Tuesday by Shari Ahrendsen and Barry Clement, challenges a 2017 transaction in which World Travel—which isn’t named as a defendant—became 100% employee-owned through an employee stock ownership plan. Ahrendsen and Clement say plan trustee Prudent Fiduciary Services LLC failed to conduct proper due diligence on the stock sale, which caused employees to overpay for World Travel’s stock while taking on hundreds of millions of dollars in debt.

The $200 million purchase price included a “control premium” meant to account for the plan’s 100% ownership interest in World Travel, but the plan was never given control of the company’s board of directors, Ahrendsen and Clement say. And the due diligence that Prudent Fiduciary conducted in connection with the transaction was “less extensive and thorough than the due diligence performed by third-party buyers in corporate transactions of similar size and complexity,” they say.

“Due to the Plan’s overpayment, the Plan’s participants, including Plaintiffs, received diminished stock allocations, saw their Plan take on excessive debt to finance the Transaction, and suffered losses to their individual Plan accounts,” according to the complaint.

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