FROM: U.S. DEPARTMENT OF LABOR
US Labor Department sues to recover losses to employee stock ownership plan of Rembar Inc.
NEW YORK — The U.S. Department of Labor has filed a lawsuit to recover losses suffered by participants in the Rembar Inc. Employee Stock Ownership Plan after the plan allegedly was allowed to purchase overvalued company stock. The suit names as defendants Rembar owner and CEO Frank Firor and First Bankers Trust Services Inc., which was hired as an independent fiduciary and trustee in connection with the company's newly formed plan. The plan is also a defendant.
"Employee Retirement Income Security Act fiduciary duties are the highest standard of care known to the law and apply to those who manage employee benefit plans," said Jonathan Kay, regional director of the Labor Department's Employee Benefits Security Administration's New York Regional Office. "The department remains committed to ensuring that fiduciaries work solely in the interest of plan participants and beneficiaries."
The suit alleges that, in June 2005, First Bankers Trust Services allowed the plan to purchase 100 percent of the company's stock from Firor and Firor's relatives for $15.5 million. An investigation by EBSA determined that First Bankers Trust Services failed to comply with its duty to understand the valuation report that set the purchase price, identify and question assumptions in the report, and verify that the conclusions in the report were consistent with the company's financial data. As a result of First Bankers Trust Services' failure to comply with its fiduciary duties, the plan overpaid for the stock and suffered losses.
The suit seeks, among other things, to recover jointly from First Bankers Trust Services and Firor all losses suffered by the plan.
Rembar Inc. is engaged in the distribution and manufacturing of precision parts made from refractory metals. The suit was filed in the U.S. Court for the Southern District of New York and is being litigated by the department's Regional Office of the Solicitor in Manhattan. The suit is based on an investigation conducted by EBSA's New York Regional Office.
