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News Release
Labor Department Sues California Metal Company Over Stock Contributed To Pension Plan
Archived News Release — Caution: Information may be out of date.
Los Angeles, California - The U.S. Department of Labor has sued Brea, California-based metal distributor Earle M. Jorgensen Company, its holding company and the employee stock ownership plan’s (ESOP) benefit committee for failure to correct deficiencies in stock valuations, resulting in lower contributions to the plan.
The benefit committee allegedly violated the Employee Retirement Income Security Act (ERISA) by allowing common stock contributed to the ESOP to be valued at more than fair market value. Named in the suit are the company, its parent holding company Earle M. Jorgensen Holding Company, Inc., and benefit committee members Randal J. Haas, Lonnie R. Terry, Charles P. Gallopo and Stephen C. Wild.
The suit alleges that the defendants failed to take reasonable steps to investigate and correct deficiencies in valuations conducted by Houlihan, Lokey, Howard and Zukin. Due to the valuation errors, the plan received fewer shares of stock and less value than it would have had the stock been properly valued. The department contends the benefit committee should have caught and corrected the errors made by Houlihan.
As relief, the suit seeks a court order to require that the defendants purchase back all stock contributed to the plan at the values assigned by Houlihan, to correct any prohibited transactions with the plan and permanently bar the benefit committee members from serving as fiduciaries with respect to the investment of assets of plans governed by ERISA.
Jorgensen Company is a privately-held company which distributes steel, aluminum and other metals and sponsored the ESOP for 1,293 participants. As of March 1999, the plan reported assets of $69,829,615 of which $64.8 million represented employer securities.
The case, filed March 8, 2002 in federal district court in Santa Ana, resulted from an investigation conducted by the Los Angeles Regional Office of the department’s Pension and Welfare Benefits Administration into alleged violations of ERISA.
(Chao v. Earle M. Jorgensen Company
Civil Action No. SACV-02-257)
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Archived News Release — Caution: Information may be out of date.