Fiduciary Duties of CEO/ESOP trustee

[Guest djsimonetti]

Is anyone aware of any authority for the position that the CEO of a privately held employer who is the trustee of its ESOP breaces his fiduciary duty to the participants by causing the employer to engage in activites which benefit him and are detrimental to the employer?

[Guest RARogers]

There's lots of authority on this. The most prominent that I can think of is Donovan v. Bierwirth (early 80s), which deals with conflict of interest issues. I'm sure there's lots more.

Also, the ESOP has a shareholder lawsuit against the "trustee" and the Board.

[Guest djsimonetti]

Thanks for the site but that case dealt with the trustee causing the ESOP to buy

stock in the employer during a tender offer. In my case, the alleged breaches consist of activities which usually give rise to shareholder derivative actions such as wasting assets, "sweetheart" deals between the employer and the fiduciary's family, etc. I know the ESOP can bring the derivative action like any other shareholder but I would like to add an ERISA claim by the ESOP or the participants.

[Guest RARogers]

I think you'll be able to find something. Look at what the person did or didn't do in his or her fiduciary capacity. Did the fiduciary cause the plan to purchase the stock? Did it value the stock? Did it cause payments to be made prematurely or late? Did it not sell the stock when it had the chance to? Did it not do something with the stock when it should have?

If the fiduciary did any of these things (and there could lots of other things it might have done in its fiduciary capacity) and it had a conflict of interest you may have the basis for a claim (Bierwirt case - making plan fiduciary decisions when you have a conflict of interest is discouraged and may result in some sort of presumption against the fiduciary).

[Note: This message has been edited by Brian Ortelere]