The owner of a Manhattan laser surgery center has reached agreement with The Department of Labor (DOL) to pay $5 million to its employee stock ownership plan (ESOP) in order to resolve violations of the Employee Retirement Income Security Act (ERISA).
The agreement was formalized in a consent judgment issued by the U.S. District Court for the Southern District of New York.
An investigation by the DOL’s Employee Benefits Security Administration (EBSA) found Roy Geronemus, owner of the Laser and Skin Surgery Center of New York, had hired his accountant Samuel Ginsberg to serve as the ESOP’s trustee. Ginsberg then approved the transaction despite a valuation that omitted Geronemus’s actual compensation and corporate debt, in addition to other errors, according to the EBSA investigation.
EBSA found that as a result, the ESOP paid too much when it subsequently purchased some of Geronemus’s stock in his company for $24 million, in violation of ERISA. The violations led the DOL to file suit against Geronemus and Ginsberg.
“Accurate company valuations are critical when it comes to establishing an employee stock ownership plan,” said EBSA Regional Director Jonathan Kay, in New York.
“This agreement upholds our findings that Geronemus violated his fiduciary duty to the plan and its participants when he caused the Laser and Skin Surgery Center of New York Employee Stock Ownership Plan to overpay for the shares,” said Regional Solicitor Jeffrey S. Rogoff, in New York. “It also serves notice to plan fiduciaries that their sole obligation is to protect the interest of the plan participants.”
Under the terms of the consent order and judgment, Geronemus is required to make a cash payment of $5 million to the ESOP and pay a $500,000 penalty. He will also forgive past-due and future compensation that would otherwise be owed to him. In addition, Geronemus and Ginsberg are enjoined from serving as fiduciaries to any ERISA-covered plan.