US Labor Department sues Gruber Systems and its CEO to recover more than $2.6 million in losses to employee stock ownership plan

LOS ANGELES – The U.S. Department of Labor has filed a lawsuit against Gruber Systems Inc. and its CEO John Hoskinson alleging that the defendants caused the company's employee stock ownership plan participants to lose money when the plan purchased additional company stock for significantly more than fair market value in two transactions totaling $2.6 million.

The suit alleges that this money should have been set aside to fund the retirement accounts of Gruber retirees, but was steered into the stock purchase to fund the financially distressed company.

Based in Valencia, Gruber provides molds, automation equipment, and supplies for the cast polymer and other composite-related industries.

"Plan funds must be invested in the interest of workers and retirees, not used to prop up a struggling firm," said Crisanta Johnson, Los Angeles regional director of the department's Employee Benefits Security Administration. "Too often, we see employee stock ownership plan funds used illegally by company owners and management to bolster companies. Doing so threatens the financial security of workers and retirees."

Filed in the U.S. District Court in California, the suit seeks a reversal of the $2.6 million in prohibited stock transactions, the restoration of any related plan losses, including lost opportunity costs, and a court order requiring the defendants to account for and restore losses to plan participants.

The department is also seeking permanent enjoinment of Hoskinson from serving as a fiduciary or service provider to any plan covered by the Employee Retirement Income Security Act and his removal from any positions he holds as a plan fiduciary. The suit requests the appointment of an independent fiduciary to distribute the plan's assets to participants and beneficiaries and to terminate the plan; an action for which Hoskinson and the company must pay.

The case was investigated by EBSA's Los Angeles Regional Office and is being litigated by the department's Regional Office of the Solicitor in San Francisco. Workers and employers with questions about benefit plans can contact a benefits adviser at 866-444-3272 or through http://www.dol.gov/ebsa/contactEBSA/consumerassistance.html.

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