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News Release
Labor Department Requires California Metal Company to Guarantee Price of Stock Contributed To Retirement Plan
Archived News Release — Caution: Information may be out of date.
Los Angeles, California - The U.S. Department of Labor obtained a consent order on January 29, 2003, requiring Brea, California-based metal distributor Earle M. Jorgensen Company to guarantee the price of stock contributed to its employee stock ownership plan (ESOP).
The judgment also requires the company to value stock held by the plan consistent with past stock valuations so participants can benefit from the fact that stock previously contributed to the plan was over-valued.
Los Angeles Regional Director Billy Beaver said, “This settlement is designed to ensure that workers’ future retirement benefits are not compromised by valuation errors.”
The Labor Department sued the company’s benefit committee for violating the Employee Retirement Income Security Act (ERISA) for over-valuing stock contributed to the ESOP by the Earle M. Jorgensen Holding Company, Inc. The March 8, 2002 lawsuit named as defendants the company, its parent holding company and former benefit committee members Randal J. Haas, Lonnie R. Terry, Charles P. Gallopo and Stephen C. Wild.
The suit alleged that the defendants over-valued the common stock contributed to the plan from 1994 to 2000. This resulted in the plan’s participants receiving much less stock than they were entitled in their pension accounts. In addition, the benefit committee allegedly failed to catch and correct errors made by Houlihan, Lokey, Howard and Zukin in valuing the stock.
Jorgensen Company is a privately-held company which distributes steel, aluminum and other metals and the sponsor of 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 in federal district court in Santa Ana, resulted from an investigation conducted by the Los Angeles Regional Office of the department's Employee Benefits Security Administration into alleged violations of ERISA.
(Chao v. Earle M. Jorgensen Co.)
Civil Action No. SACV-02-257
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Archived News Release — Caution: Information may be out of date.