Compliance April 25, 2012

Cellular Company Owner Accused of Misusing ESOP

The U.S. Department of Labor filed a lawsuit seeking to recover losses suffered by participants in the Parrot Cellular Employee Stock Ownership Plan (ESOP).
Reported by

The suit alleges that the defendants caused or permitted the ESOP to purchase the parent company’s stock for more than fair market value and that 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 retirement plan, enriched himself by millions of dollars at the expense of the plan and its participants.  

In addition to Webb, the suit names as defendants EVI executives Matthew Fidiam and J. Robert Gallucci and 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.   

For more stories like this, sign up for the PLANADVISERdash daily newsletter.

Investigators determined that the ESOP purchased approximately 90% 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 the Employee Retirement Income Security Act (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.

 

The Markets April 25, 2012

TDFs See Positive Returns in Q1 2012

A lingering low interest rate environment helped make equities more attractive in the first quarter, Ibbotson reports. 
Reported by

The effect was strong outperformance of target-maturity funds further from retirement as those funds tend to allocate much higher levels to equity. During the last 12 months there was mixed performance among asset classes around the globe, resulting in disparate performance among target-maturity funds.

Performance highlights (or lows) for the quarter include:

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

The average return for target maturity-funds was nearly 9%, more than 3.5% below the S&P 500 Index but more than 8.5% better than the BarCap U.S. Aggregate Bond Index.

For the second consecutive quarter, all target-maturity funds with at least a one-year history ended the period with a positive return. Those funds furthest from retirement had the strongest relative performance, as equities significantly outperformed fixed income.

Assets poured into target-maturity funds during the first quarter. This combined with the strong performance among equities resulted in total AUM for target-maturity funds exceeding $429 billion, hitting an all-time high.

The full report can be viewed here.

Ibbotson also released a research paper that examines how to evaluate the performance of a target-date fund. Picking the best target-date benchmark and simply comparing the return and risk to the fund won’t provide an accurate picture. The paper explains how to adjust for glide path and asset allocation differences between the benchmark and fund, and then how to evaluate the underlying funds within the target-date fund and overall fees to get a true picture of performance. 

The paper can be accessed here.  

 

«