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Sam Zell S ESOP leveraged purchase of Chicago Tribune Q

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In researching ESOP Loans and potential prohibited transaction violations of ERISA under 406(a) I'm curious more than anything whether Sam Zell was assessed for violating 406 as that transaction seems to be a direct transaction with a potential for conflict of interest? 

Did his bankruptcy discharge any potential prohibited transaction violations? 

Did the esop loan meet erisa 408 exemption? 

Is erisa prohibited transaction rule 406(a) intended for esop loans? 

Thoughts and comments appreciated. 

Resources and court cases would be helpful as well as I'm beginning research on this topic. 

Thank you 


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You might begin by using your Bloomberg Law, LEXIS, or Westlaw subscription to read the reported and unreported but commercially published decisions in Neil v. Zell, Case No. 08-CV-6833 in the United States court for the Northern District of Illinois. While there are many reports, some essentials are these:

Neil v. Zell, 2008 WL 11342700 (C.D. Cal. Nov. 17, 2008) (transferring case to Illinois where the ESOP was administered, most of the evidence was found, and the operative agreements called for the application of Illinois law).

Neil v. Zell, 677 F. Supp. 2d 1010 (N.D. Ill. Dec. 17, 2009 amended Mar. 11, 2010) (dismissing some claims, and denying dismissal of other claims) (complaint alleged enough to assert a claim that GreatBanc breached its fiduciary responsibility).

Neil v. Zell, No. 08 C 6833, 2010 WL 3167293 (N.D. Ill. Aug. 9, 2010) (“Tribune [Company] is not a party to this case, so the court cannot order relief that would involve repayment of funds that originated with Tribune.”) (“if Zell and EGI-TRB are shown to have participated in a fiduciary breach or to have engaged in a transaction prohibited by ERISA, barring them from having fiduciary responsibility over the ESOP might constitute appropriate equitable relief.”).

Neil v. Zell, 753 F. Supp. 2d 724, 731 (N.D. Ill. Nov. 9, 2010) (analyzing ERISA §§ 407(d), 408(b)(3), 408(e), and Internal Revenue Code of 1986 §§ 409(l), 4975, 26 C.F.R. §§ 54.4975-7, 54.4975-11) (For a person to be subject to equitable relief regarding a prohibited transaction, it is enough that the person “had actual or constructive knowledge of the deal's details”; one need not show the actor knew, or even ought to have known, that the transaction was a prohibited transaction).

Neil v. Zell, 767 F. Supp. 2d 933, 50 Empl. Benefits Cas. (BL) 2801 (N.D. Ill. Feb. 28, 2011) (denying GreatBanc partial summary judgment to limit restoration).

Neil v. Zell, 275 F.R.D. 256, 259 (N.D. Ill. Mar. 4, 2011) (granting motions to certify the class and appoint plaintiffs’ counsel as class counsel).

Ex-Tribune Workers Reach $32 Million Deal In ERISA Lawsuit Involving Buyout of ESOP, Bloomberg Law Benefits & Executive Comp, Aug. 23, 2011, 12:00 AM.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania



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