COLUMBUS, Ohio – Fiduciaries are facing legal action following losses exceeding $5.9 million to the Triple T Transport Inc. Employee Stock Ownership Plan (ESOP), according to a federal lawsuit. The lawsuit, filed in Ohio, addresses actions that directly impacted the retirement savings of employees at the Lewis Center, Ohio-based company, alleging violations of the Employee Retirement Income Security Act (ERISA).
The Employee Benefits Security Administration (EBSA) Cincinnati Regional Office conducted an investigation that revealed critical findings. Thomas E. Potts Jr., owner of Fiduciary Trust Services Inc., is alleged to have authorized the ESOP to purchase 80 percent of Triple T Transport stock for $17.46 million in January 2011. This amount is claimed to be at least $5.9 million more than the stock’s actual fair market value.
The complaint further details that Fiduciary Trust Services and Potts are accused of causing the plan to significantly overpay. This overpayment is attributed to several failures, notably the improper review and recognition of errors present in a valuation analysis and fairness opinion provided by ComStock Valuation Advisors Inc.
EBSA investigators identified key flaws in the ComStock Valuation Advisors Inc. report. These flaws include:
- Utilizing an unreasonably high long-term growth rate projection for Triple T Transport.
- Adding an inappropriate control premium to the valuation.
- Committing errors in the calculation of the weighted average cost of capital (WACC).
- Selecting comparable companies for valuation that were not realistically similar to Triple T Transport.
- Incorrectly valuing warrants for the selling shareholders of Triple T Transport.
These errors in the ComStock report, according to the investigation, led Potts to inaccurately determine the fair market value of Triple T Transport, inflating the value by $5.9 million.
Triple T Transport Inc., acting as both the plan administrator and plan sponsor of the ESOP, had entrusted Potts and Fiduciary Trust Services to serve as independent fiduciaries for the ESOP transaction.
The lawsuit seeks legal recourse to mandate Fiduciary Trust Services Inc. and Potts to restore all losses incurred by the ESOP, in addition to accrued interest.
The EBSA, a division of the U.S. Department of Labor, is dedicated to protecting the retirement, health, and workplace-related benefits of American workers, retirees, and their families. The agency’s oversight extends to approximately 684,000 private sector retirement plans, 2.4 million health plans, and other benefit plans covering over 141 million Americans, holding over $7.6 trillion in assets. More information about EBSA is available at www.dol.gov/ebsa/.
Court: U.S. District Court, South District of Ohio, Eastern Division, Columbus
Docket Number: 2:16-cv-00612
