PHOENIX – The U.S. Department of Labor has recovered $22.5 million from an employee stock ownership plan’s former trustee, Reliance Trust Company for the plan’s overpayment for a recreational vehicle rental company’s stock, after obtaining approval of a consent judgment in the U.S. District Court for Arizona on Aug. 30, 2023.
The consent judgment requires Reliance Trust Company to pay more than $20.4 million to workers who participated in the RVR Inc. Employee Stock Ownership Plan to resolve fiduciary breach claims alleged in a lawsuit the department filed. The court also ordered the company to pay a penalty of more than $2 million for its violations of the Employee Retirement Income Security Act.
The lawsuit followed an investigation by the department’s Employee Benefits Security Administration and alleged that Reliance caused the ESOP to overpay when it purchased 100 percent of the shares of RVR Inc. for $105 million in May 2014.
“When a trustee purchases stock on behalf of a retirement plan such as the RVR Employee Stock Ownership Plan, its first responsibility is to make sure that the plan’s participants get a fair deal and don’t pay more than the worth of the stock,” said Assistant Secretary for Employee Benefits Security Lisa M. Gomez. “Plan fiduciaries’ duty of loyalty is owed to the plan’s participants, not to sellers looking out for their own bottom line. When fiduciaries cut deals for the financial benefit of sellers at the expense of their employees, the Department of Labor will take appropriate action to ensure that plan participants get full value for their money.“
The lawsuit also alleges ERISA violations by additional fiduciaries of the RVR Employee Stock Ownership Plan and other defendants, including RVR board members Randall Smalley, Robert Smalley Jr. and Eric Bensen for failing to monitor Reliance prudently and allowing the trustee to purchase the stock for more than its fair value. The department’s claims against defendants other than Reliance remain pending. The case is scheduled for trial in January 2024.
“This consent judgement ensures that the rights and benefits of the plan’s participants are protected and shows that we will aggressively pursue appropriate legal action to provide relief to participants who are harmed when fiduciaries fail to follow the law,” said Solicitor of Labor Seema Nanda. “Retirement plan fiduciaries must comply with safeguards in the Employee Retirement Income Security Act that protect workers’ retirement benefits and fulfill their own fiduciary responsibilities.”