Kentucky Plan Trustee Ordered To Pay More Than $1 Million In Restitution To ESOP And Retirement Plan

Archived News Release — Caution: Information may be out of date.

The trustee of an Employee Stock Ownership (ESOP) and retirement plan in Louisville, Ky., will be required to pay almost $2 million for making illegal payments to herself from the ESOP and for retroactively amending the company’s retirement plan documents to reduce future benefit accruals to plan participants, in a default judgment entered on Dec. 6 in the United States district court in Louisville, Ky. Also named in the judgment was the company Building Services Unlimited, Inc.

Maxine Mount, who now resides in Panama City, Fla., was trustee of Contractor’s and Employees’ Retirement Plan and the ESOP for Building Services Unlimited, Inc. of Louisville. A lawsuit filed by the Department of Labor on

Nov. 12, 1998, alleged that Mount and Stock Yards Bank, as trustees, made the company’s ESOP a party to a $1,350,000 promissory note, and then Stock Yards Bank made monthly installment payments from the ESOP to Mount in exchange for 30 percent of the company’s outstanding common stock. As a result, Mount received monthly installment payments from the ESOP between April 1993 and October 1994, which totaled $290,114.

The lawsuit also alleged that in December 1999 Mount created the ESOP and retroactively terminated the retirement plan to reduce accrual of benefits to participants retroactively to June 30, 1992. Upon termination, the retirement plan had assets valued at $293,090.

Furthermore, the lawsuit alleged that Mount’s and Stock Yards Bank’s actions violated provisions of the Employee Retirement Income Security Act (ERISA) that prohibited self dealing on the part of a trustee and dealing with plan assets in a manner that was adverse to plan participants.

The default judgment requires Mount and Building Services Unlimited, Inc. to restore $1,941,519 to the ESOP, bars Mount from ever serving as a trustee of an employee benefit plan and from occupying any position of authority with respect to a plan administered by ERISA. The department’s lawsuit against Stock Yards Bank is still pending.

The judgment and order resulted from an investigation by the Cincinnati Regional Office of the department’s Pension and Welfare Benefits Administration into alleged violation of ERISA.

Herman v. Building Services Unlimited
Civil Action No. 3:98CV700C

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Archived News Release — Caution: Information may be out of date.