The Anatomy of a DOL ESOP Investigation and Lawsuit and the Related Valuation Issues

January 13, 2022

On September 17, 2021, David R. Johanson, Esq. and his team at Hawkins Parnell & Young, LLP and their expert witnesses, Ken Pia of Marcum LLP, Gregory K. Brown, Esq. of Polsinelli, and Ian Rusk of  Rusk O’Brien Gido + Partners, LLP, secured a complete victory for their clients Brian J. Bowers, Dexter C. Kubota, and Bowers + Kubota Consulting, Inc. (B+KC) in an Employee Retirement Income Security Act of 1974, as amended, (ERISA), action brought by the Secretary of the United States Department of Labor (DOL) following a bench trial in June 2021 in the U.S. District Court for the District of Hawai’i. 

David will be joining the mentioned expert witnesses as they dissect the lawsuit further and present on the following issues:

  • An explanation of why the ESOP transaction in question was not an ERISA prohibited transaction and how to structure ERISA-compliant deals involving ESOPs
  • Failed theories by the DOL, including, without limitation, the DOL’s on a pre-ESOP transaction non-binding indication of interest that turned out to be irrelevant
  • A preliminary valuation for the ESOP plan sponsor that also proved to be irrelevant, a preliminary valuation by the ESOP’s independent appraiser that was accomplished prior to the formal retention of an independent fiduciary and trustee
  • Detailed financial projections that the DOL challenged for seven years that turned out to spot on
  • The use of compiled financial statements for an ESOP valuation
  • Technical valuation errors by the DOL’s valuation “expert” and internal national office valuation “expert”, and factual mistakes by the DOL and its ERISA fiduciary “expert” regarding ESOP transaction and purchase price negotiations.