Labor Department Recoups $325,000 for Louisville, Kentucky, ESOP

Archived News Release — Caution: Information may be out of date.

Louisville, Kentucky - The U.S. Department of Labor obtained a court order requiring Stock Yards Bank of Louisville, Kentucky, to pay $325,000 to the employee stock ownership plan (ESOP) of Building Services Unlimited, Inc., also of Louisville, for allegedly improperly causing the plan to buy the company’s common stock at an inflated price.

“This resolution sends the message that we won’t tolerate the mishandling of people’s retirement funds,” said Secretary of Labor Elaine L. Chao.

Stock Yards Bank was the trustee of the ESOP sponsored by Building Services Unlimited for its employees. The plan, established December 31, 1992, covered as many as 262 participants.

The consent order and judgment, entered on December 6, in federal district court in Louisville, requires the bank to restore losses suffered by the ESOP. The court action also appoints Larry Lefoldt of Lefoldt & Co., P.A., as an independent fiduciary.

The Labor Department sued the bank, Building Services Unlimited, and its owner, Maxine Mount, over a $1.35 million promissory note under which Stock Yards Bank made monthly payments from the plan to Mount in exchange for 30 percent of the company’s common stock. Mount received over $290,000 between April 1993 and October 1994 as a result of the transaction.

In addition to allegedly improperly causing the plan to buy the company’s common stock at an inflated price, the lawsuit also alleged that Stock Yards Bank and Mount violated the Employee Retirement Income Security Act (ERISA) by using the plan assets for their own benefit. Mount was previously ordered to restore $1,941,519 to the plan and was permanently barred from servicing any plan governed by federal employee benefit law.

The consent order and judgment resulted from an investigation by the Cincinnati regional office of the department’s Pension and Welfare Benefits Administration into alleged violations of ERISA. Plan officials, participants, and beneficiaries can reach the Cincinnati office at 859.578.4680 for help with any problems relating to private-sector pension and health plans.

(Chao v. Building Services Unlimited
Civil Action No. 3-98-CV-700C)

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Archived News Release — Caution: Information may be out of date.