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DOL Recovers $6.3M for Employee Stock Plan

Execs at a specialty gas company have reached a settlement after cheating the plan.

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BOSTON – Maine Oxy-Acetylene Supply is a distributor of industrial, medical and specialty gasses as well as welding and cutting equipment, supplies and accessories throughout New England. In 2004, the company established an employee stock ownership plan (ESOP).

On Monday, the U.S. Department of Labor reached a settlement agreement with the fiduciaries of the Auburn, Maine-based company's ESOP to recover $6.3 million for the plan's participants and resolve alleged violations of the Employee Retirement Income Security Act.

The agreement follows a lawsuit filed in 2020 by the department against the company, its president and CEO Daniel Guerin, company director Bryan Gentry and the ESOP’s trustee, Carl Paine. The lawsuit alleged the defendants breached their fiduciary duties by causing and permitting the company to buy back the ESOP shares for less than fair market value when the plan was terminated in 2013. In April 2022, the department’s suit was consolidated with a 2019 class action brought by ESOP participants.

The allegations are the result of investigation by the department’s Employee Benefits Security Administration.

The department alleged Guerin and Gentry purchased 51 percent of the company in September 2012 and concealed the price from the ESOP trustee and participants through a nondisclosure agreement with the ESOP’s annual valuation appraiser. By failing to appropriately consider that transaction, along with other flaws in the appraisal, the company, Guerin, Gentry and Paine caused the Maine Oxy plan’s shares to be valued at approximately $135, which was 20 percent of the share price of $655 paid by Guerin and Gentry just seven months earlier.

"Fiduciaries must act solely for the benefit of the plan participants, not themselves. Our investigation alleges that Maine Oxy and Daniel Guerin imposed a non-disclosure agreement on a valuation company to hide relevant information about the value of the employee stock purchase plan from the trustee," said Employee Benefits Security Administration Regional Director Carol Hamilton in Boston. “These actions shortchanged the plan participants and violated the Employee Retirement Income Security Act."

To resolve the matter, the department, the class action plaintiffs, and the company, Guerin, Gentry and Paine, then engaged in mediation and reached a settlement that the U.S. District Court for the District of Maine approved. In addition to the financial settlement with the plan’s participants, Guerin, Gentry and Paine also agreed to pay a civil money penalty of $630,000 and permanently refrain from acting in a fiduciary capacity with any ERISA-covered benefit plan. The department previously reached agreement with the valuation company and secured disgorgement of all fees paid for the flawed valuation.

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