DALLAS – The U.S. Department of Labor has filed a complaint in federal court seeking to recover $35 million in losses and alleging that three members of a Carrollton moving and storage company’s board of directors and a trustee of the company’s employee stock ownership plan allowed the sale of the ESOP’s ownership interest for less than its market value in violation of the Employee Retirement Income Security Act.
Following an investigation by the Employee Benefits Security Administration, the department filed suit in the U.S. District Court for the Eastern District of Texas, Sherman Division, against the trustee of RVNB Holdings Inc.’s ESOP Neil Brozen and board members Robert Peterson, Vasilia Peterson and Paul Generale. The suit also includes the 2012 irrevocable trusts of the Petersons’ children.
The department’s suit alleges Brozen, the Petersons and Generale committed fiduciary violations when Brozen sold the ESOP’s stock for less than it was worth. The two trusts set up to benefit the Petersons’ children were also knowing participants in the ERISA violations, and received millions of dollars that should have gone to the ESOP.
“Instead of acting with undivided loyalty to the plan and the participant employees, as was their legal duty, the RVNB fiduciaries transferred most of the retirement plan’s value from the plan and its employee owners to company insiders and relatives at the employees’ expense,” said Acting Assistant Secretary of Labor for the Employee Benefits Security Administration Ali Khawar.
In its complaint, the department alleges that, at the time of the stock sale, the ESOP owned stock that was worth between $44.8 and $58.2 million. Rather than ensure that the ESOP received full value for its 100 percent ownership of the company, the department alleges that Brozen, the Petersons and Generale caused RVNB to redeem the ESOP’s entire ownership interest for just $12.5 million, effectively transferring the rest of the stock’s value to the Petersons and their children’s trusts at the expense of the employee participants of the RVNB plan. RVNB was subsequently sold for $200 million along with other assets to a third party for $252 million. The complaint seeks to recover all plan losses and enjoin defendants from acting as trustee, fiduciary or service provider in any ESOP transaction.
“Under the Employee Retirement Income Security Act of 1974, fiduciaries must act with prudence and undivided loyalty to plan participants and refrain from engaging in the sort of prohibited transactions alleged here” said U.S. Department of Labor Regional Solicitor John Rainwater. “The U.S. Department of Labor will use every tool available to protect and promote the security of employee benefits and retirement earnings of America’s workers.”
RVNB Holdings Inc. formerly operated as All My Sons, a moving and storage enterprise comprised of multiple offices at locations throughout the U.S.