U.S. Increases Scrutiny of Employee-Stock-Ownership Plans

U.S. Increases Scrutiny of Employee-Stock-Ownership Plans

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U.S. Increases Scrutiny of Employee-Stock-Ownership Plans
Transactions That Cheat Workers Have Drawn Attention to Plans Millions Rely on

By Ruth Simon and Sarah E. Needleman
Updated June 22, 2014 8:52 p.m. ET

The federal government is stepping up scrutiny of how U.S. companies are valued for employee-stock-ownership plans, a vital source of retirement savings for millions of workers. ... Some owners are selling stakes in their companies to employee-stock-ownership plans at inflated prices, the government says, jeopardizing those savings.

The Labor Department is the plaintiff in 15 lawsuits related to employee-stock-ownership plans, with "virtually all" the cases alleging shoddy estimates of what a company's shares are worth, said Timothy Hauser, a deputy assistant secretary at the agency's Employee Benefits Security Administration.

"Valuation is the first, second, third and fourth problem," Mr. Hauser said. In March, Labor Secretary Thomas Perez told lawmakers that some appraisals "have been deliberately inflated," comparing them to real-estate-bubble-era home appraisals that "masterfully came in at what you needed."

Since the start of fiscal 2010, the Labor Department has recovered over $241 million through suits or investigations that were resolved without going to court, nearly all of which involve valuations. Overall, the agency has filed 28 suits tied to employee-stock-ownership plans since October 2009, double the total in the previous six years, according to an internal tally reviewed by The Wall Street Journal.....

Write to Ruth Simon at ruth.simon@wsj.com and Sarah E. Needleman at sarah.needleman@wsj.com

Just as that other thread said about Phyllis Borzi, Google DU for the Employee Benefits Security Administration.

Tonight on FRONTLINE: The Retirement Gamble