The U.S. Department of Labor (DOL) is suing the trustee of the employee
stock ownership plan (ESOP) established for employees of 31 Miller’s Merry
Manor nursing homes.
According to DOL, a suit has been filed in the U.S. District Court alleging
that PBI Bank Inc., the trustee of the ESOP for Miller’s Health Systems
Inc., authorized a purchase of stock for $40 million, an amount far in
excess of the fair market value of the stock.
The suit also alleges that PBI Bank approved financing for the transaction
at an excessive interest rate, DOL said.
Miller’s Health is a Warsaw-based company which manages 31 long-term care
facilities under the name Miller’s Merry Manor and 10 assisted-living
facilities under the name Miller’s Senior Living.
“Fiduciaries must act with undivided loyalty to plan participants,” said
Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi.
“When it comes to ESOP stock purchases, they must ensure that the plan
receives full value for its money.”
“An investigation by the Chicago Regional Office of the department’s
Employee Benefits Security Administration focused on a September 2007 stock
purchase,” DOL said. “The suit alleges that PBI violated ERISA by
imprudently and disloyally approving the purchase of stock by the plan. The
suit seeks to require PBI to restore all losses suffered by the ESOP, plus
interest. After conducting its investigation, the department concluded that,
as a result of the design of the transaction and the fiduciary breaches of
PBI, the stock purchase was not for the primary benefit of participants and
did not promote employee ownership in Miller’s Health. As a result, the
department concluded that PBI was responsible and liable for violations of
the Employee Retirement Income Security Act.”
The lawsuit also seeks to remove PBI as a fiduciary and service provider of
the plan and to permanently bar it from serving as a fiduciary or service
provider to ERISA-covered plans in the future.
As of Sept. 30, 2012, the ESOP had 2,939 participants and assets of
For help with problems related to private sector retirement and health
plans, employers and workers can reach EBSA’s Chicago office at (312)
353-0900 or toll-free at (866) 444-3272.