US Department of Labor files suit to recover losses to employee stock ownership plan of SJP Group

CLIFFWOOD BEACH, N.J. ‒ The U.S. Department of Labor has filed a lawsuit seeking to recover losses suffered by participants in the SJP Group Inc. Employee Stock Ownership Plan. The department’s suit is based on an investigation conducted by its Employee Benefits Security Administration that found violations of the Employee Retirement Income Security Act.

SJP Group Inc., a paving and building site company, is headquartered in Cliffwood Beach. The suit names as a defendant First Bankers Trust Services Inc., which was hired as an independent fiduciary to advise the company’s ESOP on whether, and at what price, to purchase shares of SJP Inc. from its majority shareholder, Vincent DiPano. DiPano, who also is named as a defendant, was a fiduciary of the plan as well as an officer and member of the board of directors of SJP Group. The ESOP, too, is a defendant.

The suit alleges that on or around April 16, 2007, First Bankers Trust Services did not fulfill its fiduciary duties when it approved the ESOP’s purchase of 38 percent of the outstanding stock of SJP Group from DiPano for $16 million, which was more than fair market value. DiPano allegedly sold his shares to the plan for what he knew or should have known was in excess of what the stock was worth.

An ESOP is a type of retirement plan that is permitted to invest some or all of its assets in employer stock.  Because participants’ benefits depend on the ESOP buying and selling stock for fair market value, the department intends to make certain that the price an ESOP pays for the plan sponsor’s stock reflects its true market value, those retained to advise an ESOP about the stock purchase fulfill their fiduciary duties under ERISA and those who sell their shares to an ESOP do not receive a windfall.
         
In addition to recovering all losses, the suit seeks to have First Bankers Trust Services and DiPano permanently enjoined from serving as fiduciaries to ERISA-covered plans.

The suit was filed in the U.S. District Court for the District of New Jersey and is being litigated by the department’s Regional Office of the Solicitor in New York.

Employers and workers can reach EBSA’s New York office at 212-607-8600 or toll-free at 866-444-3272 for help with problems related to private sector retirement and health plans. Additional information can be found at www.dol.gov/ebsa.

U.S. Department of Labor news materials are accessible at www.dol.gov. The information above is available in large print, Braille, audio tape or disc from the COAST office upon request by calling 202-693-7828 or TTY 202-693-7755.