US Department of Labor files suit to recover losses to employee stock ownership plan of Campbell, Calif.-based Parrot Cellular
25 Apr, 2012, 02:38 ET
SAN FRANCISCO, April 25, 2012 /PRNewswire-USNewswire/ -- The U.S. Department of Labor has filed a lawsuit in the U.S. District Court for the Northern District of California seeking to recover losses suffered by participants in the Parrot Cellular Employee Stock Ownership Plan, or ESOP. The department's suit is based on an investigation conducted by its Employee Benefits Security Administration that found violations of the Employee Retirement Income Security Act.
The suit names as a defendant Dennis Webb, the principal owner of Entrepreneurial Ventures Inc., which operates Parrot Cellular telephone retail stores in northern and central California, and is the sponsor of the worker retirement plan. EVI executives Matthew Fidiam and J. Robert Gallucci also are named as defendants, as is Consulting Fiduciaries Inc., an Illinois company that served as the independent fiduciary and investment manager for the ESOP during a November 2002 stock purchase by the ESOP. Both Parrot Cellular and EVI are headquartered at the same location in Campbell.
The suit alleges that the defendants caused or permitted the ESOP to purchase EVI stock for more than fair market value and that Webb enriched himself by millions of dollars at the expense of the plan and its participants.
"Plan officials are required by law to manage the ESOP in a careful, prudent manner and to act solely to benefit the plan's participants," said Jean Ackerman, director of EBSA's San Francisco Regional Office, which conducted the investigation. "This action underscores the department's commitment to protect the benefits that employers promise to their employees."
Investigators determined that the ESOP purchased approximately 90 percent of EVI stock for more than $28 million. Around the same time as the stock purchase, EVI also set aside $4 million pursuant to a deferred compensation agreement with Webb and entered into a second executive compensation agreement with Webb for $12 million. The department alleges in the suit that a reasonable value for the company as of November 2002 was far less than the amounts paid for the company stock and the total deferred compensation agreements entered into with Webb.
The defendants allegedly violated ERISA by rejecting their fiduciary duties of loyalty and prudence to the plan, engaging in self-dealing, permitting or engaging in prohibited transactions, and failing to monitor the performance of the plan's appraiser. In addition to seeking the recovery of all losses to the ESOP resulting from the above violations, the Labor Department's suit seeks the disgorgement of unjust profits from Webb that he received from the two deferred compensation agreements and from his sale of EVI stock to the ESOP.
Employers and workers can reach EBSA's San Francisco office at 415-625-2481 or toll-free at 866-444-3272 for help with problems relating to private sector retirement and health plans. Additional information can be found at http://www.dol.gov/ebsa.
U.S. Department of Labor news materials are accessible at http://www.dol.gov. The information above is available in large print, Braille or CD from the COAST office upon request by calling 202-693-7828 or TTY 202-693-7755.
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SOURCE U.S. Department of Labor
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