U.S. Labor Department obtains consent judgments recovering more than $12 million for employee stock plan participants in California and Washington

San Francisco – The U.S. Department of Labor has obtained consent judgments providing for restitution of more than $12 million from Clair R. Couturier Jr., David R. Johanson and Robert E. Eddy, plan officials and service providers involved with the employee stock ownership plan sponsored by The Employee Ownership Holding Co. of Stockton, California, and Fife, Washington. The judgments also provide for release of a fund currently holding more than $11 million, thereby making more money available to provide benefits to the ESOP’s participants and beneficiaries.

“This legal action promises to recover millions in retirement dollars for workers and retirees as entrusted to plan fiduciaries and service providers,” said Secretary of Labor Hilda L. Solis. “These settlements send a clear message that the Labor Department will not tolerate the blatant misuse of pension assets at the expense of workers and their families.”

Under the judgments and a settlement agreement filed in a related private lawsuit, the settling defendants must pay $8 million in cash into a settlement fund, pay $800,000 in civil penalties to the federal government and return property to The Employee Ownership Holding Co. with an estimated value of $4 million for the benefit of the ESOP and its participants.

Under the judgments with the department, the settling defendants will be barred for at least 10 years from serving in a fiduciary capacity to plans, and the attorney service providers will be required to comply with strict requirements in connection with their future involvement with employee benefit plans.

In November and December 2008, the Labor Department sued the settling defendants Couturier, Johanson and his firm Johanson Berenson LLP, and Eddy as well as James Roorda and Matthew Donnelly and his firm Business Appraisal Institute, for violating the Employee Retirement Income Security Act in connection with improper transactions that took place in 2004 and 2007. In 2004, Eddy approved the stock purchase by The Employee Ownership Holding Co. from Couturier without a financial valuation supporting the amount paid to Couturier. As part of that transaction, Couturier received approximately $34.4 million in cash and property in exchange for stock he owned in the ESOP (valued by the ESOP at less than $500,000 at the time) and other non-ESOP compensation worth millions of dollars less than the amount Couturier received. Couturier received $26 million in cash, property in Palm Desert, California, $2.7 million in cash to pay taxes on that property and other compensation.

Among other things, the Labor Department’s suit alleged that Donnelly, a convicted felon, and his firm were hired to justify the overpayment in cash and property paid to Couturier in exchange for stock he owned in the ESOP and other consideration. In October 2009, the court entered a consent judgment between the department and Donnelly permanently barring him from serving in the future as a fiduciary or service provider to any plan.

In addition to allegations regarding the 2004 transaction, the Labor Department’s suit separately alleged that in 2007 the company was sold under an arrangement in which the ESOP and its participants would receive distributions only after millions in improper indemnification claims were paid to defendants Couturier, Johanson and Eddy. As part of this arrangement, Eddy also received a personal bonus of more than $1.3 million as a result of his fiduciary acts. David L. Heald and his firm Consulting Fiduciaries Inc., as well as Couturier, Johanson and Eddy, were named as defendants in connection with this 2007 transaction.

On June 10, 2009, the department separately settled and dismissed all claims against Heald and Consulting Fiduciaries Inc. relating to the 2007 transaction for restitution to the ESOP and other relief. On July 17, 2009, the department obtained a consent judgment and order permanently barring Roorda from acting as a fiduciary or service provider to plans and requiring him to pay restitution to the ESOP. On March 4, 2010, the court granted the secretary of labor’s motion to appoint an independent fiduciary for the ESOP. Heald, Consulting Fiduciaries Inc. and Roorda were not parties to the consent judgments entered today.

The legal action resulted from an investigation conducted by the Labor Department’s Employee Benefits Security Administration’s San Francisco Regional Office. In fiscal year 2009, the department achieved monetary results of $1.3 billion in pension, 401(k), health and other benefits for millions of American workers and their families. Employers and workers can contact EBSA’s San Francisco office at 415.625.2481 or toll-free at 866.444.3272 for help with problems relating to private sector pension and health plans.

Solis v. Couturier
Civil Action Number 2:08-CV-02732-RRB-GGH