PEO established a multiple employer plan

[katieinny]

The owner of a PEO (Co. A) started a multiple employer plan several years ago. 5500s were never filed. He also owns one of the companies (Co. B) participating in the plan. He is in the process of selling Co. B. However, the buyer is withholding a substantial sum of money until the 5500s are filed. The owner would like to pull Co. B out of the group and file 5500s just for that plan. He knows he is obligated to take care of the 5500 filings for the multiple employer group, but says he needs to get his other company (Co. B) taken care of first because of all the money that's being withheld from the sale.

This sounds unethical to me, but not illegal. I'm hoping to get some thoughts from other practitioners.