Neil v. Zell, GreatBanc Trust, and EGI-TRB, No. 08 C 6833 (N.D. Ill., Eastern Division, Nov. 9)

Posted by Aaron Juckett, CPA, CPC, QPA, QKA on Tue, Nov 16, 2010
Find me on:

The November 15, 2010 Employee Ownership Update is online and discusses the following:

  • Court Grants Summary Judgment Against GreatBanc Trust in Tribune Case
  • IRS Says No Changes in Plan Limits for 2011
  • New Site for Nonqualified Deferred Compensation Plans
  • Penmac Staffing Services Becomes Sixth-Largest Majority Employee-Owned Company
  • IRS Says Option Exercises Causing 401(k) Errors

The Update discusses Neil v. Zell, GreatBanc Trust, and EGI-TRB, No. 08 C 6833 (N.D. Ill., Eastern Division, Nov. 9), the latest Tribune-related ruling that found that the trustee violated its fiduciary duty because it purchased newly issued unregistered shares that the court found did not meet the definition of IRC Section 409(l) – Qualifications for tax credit employee stock ownership plans - Employer securities defined:

The court said that because "other Tribune stock was available for purchase on the market, the ESOP could not sell its own shares at the time of purchase."

The Tribune ESOP transaction was exceptionally complex, with multiple stages. In this transaction, the ESOP purchased $250 million worth of unregistered shares at a time when there were still 240 million shares of the Tribune Company on the public market. The company then did a tender offer to buy and retire these shares. The court concluded that because there were still publicly traded shares on the market, the ESOP could buy only these shares. ERISA requires that ESOPs buy "qualifying employer securities," defined as either publicly traded stock or, if the company is closely held, the class of stock with the highest combination of voting and dividend rights. GreatBanc argued, in effect, that this was all part of a larger transaction that would end up with all the shares being privately held, but the court did not accept this approach. The case will almost certainly be appealed.

It also discusses how the 2011 Pension Plan Limits remain unchanged.

Topics: rules and regulations, litigation, ESOP, employee stock ownership plan

Aaron Juckett, CPA, CPC, QPA, QKA
Written by Aaron Juckett, CPA, CPC, QPA, QKA

Aaron is President and Founder of ESOP Partners and provides implementation, administration, and consulting services to hundreds of companies. He is a member of The ESOP Association (TEA) and the National Center for Employee Ownership (NCEO).

Keep Your ESOP On Track and On Time
12 Benefits of Incorporating an ESOP in your Business Exit Strategy

Recent Posts