Press Release

Fiduciaries to Utica, New York Employee Stock Ownership Plan Agree to Take Actions to Resolve Violations Found in DOL Investigation

Issued by Employee Benefits Security Administration [EBSA], U.S. Department of Labor

Jan. 4, 2022

BOSTON – An investigation by the U.S. Department of Labor has led the fiduciaries of a Utica, New York, employee stock ownership plan to agree to return $431,000 to the plan’s participants and take action to resolve its Employee Retirement Income Security Act violations.

The department’s Employee Benefits Security Administration found the fiduciaries of the Mohawk Hospital Equipment Inc. ESOP paid themselves and family members excessive compensation for several years after they sold the company to the plan. EBSA alleged that the excessive compensation violated ERISA when the fiduciaries enriched themselves and other family members at the expense of the plan and its participants, the employee owners of Mohawk Hospital Equipment.

In its settlement with EBSA, the fiduciaries will transfer stock valued at $431,000 for the benefit of the injured participants in the plan and pay the department a $43,100 penalty. They will also appoint an independent director and establish an independent compensation committee to set the salaries of the chief executive officer, chief financial officer, chief operating officer and other key employees. In addition, the CEO will resign as trustee of the employee stock ownership plan and be replaced with an independent trustee to better advocate for the plan’s interests.

“Employee stock ownership plans can be part of well-structured retirement planning for workers, but the plans need to share in corporate success. Sellers cannot unload their shares to the employee stock ownership plan but still run the company for their own benefit,” said Employee Benefits Security Administration Regional Director Carol Hamilton in Boston. “This resolution protects the rights and benefits of the program’s participants. We encourage fiduciaries and beneficiaries to contact the Employee Benefits Security Administration with their questions and concerns.”

“The Employee Retirement Income Security Act protects employee ownership in practice, not just on paper. The U.S. Department of Labor is committed to ensuring that employee stock ownership plan fiduciaries protect plan participants,” said the department’s Regional Solicitor of Labor Jeffrey Rogoff in New York.

EBSA’s Boston Regional Office, which covers central and western New York, conducted the investigation. The department’s regional Office of the Solicitor in New York negotiated the settlement for EBSA.

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