A privately held commercial bank in San Francisco, California was ordered by a U.S. district court in a fiduciary-breach judgment to pay more than $860,000 to participants in its former employee stock ownership plan (ESOP).
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California Pacific Bank and four of its fiduciaries were accused by the U.S. Department of Labor (DOL) of failing to follow the bank’s retirement plan’s requirements for terminating its ESOP, selling the stock, and paying the proceeds in cash to ESOP participants’ retirement accounts, the agency said in a November 1 press release.
The defendants, including the bank’s chairman, president, and CEO, were ordered to pay $866,840 in benefits and interest into the ESOP participants’ retirement accounts.
The U.S. District Court for the Northern District of California also found the defendants improperly diverted to the bank $81,407 of an account receivable belonging to the plan, and wrongly transferred $69,745 from the plan’s account to the bank. These amounts also were required to be repaid, with interest, in the judgment.
The DOL’s Employee Benefits Security Administration (EBSA) said its investigation found that after the bank terminated its ESOP in December 2010, the plan’s fiduciaries divided up the plan’s stock and put stock, rather than cash, into individual retirement accounts (IRAs) for the participants instead of liquidating the stock and giving cash to the participants’ plan retirement accounts as the plan document requires. Because the bank is not publicly traded, selling the bank shares they received was “difficult if not impossible” for plan participants, the DOL release said.
The district court entered the judgment on the Employee Retirement Income Security Act (ERISA) fiduciary breach on October 24.