Implications of GreatBanc Trust’s
Settlement with the Department of Labor
As part of GreatBanc Trust’s
(“GreatBanc” or the “Trustee”) recent
settlement with the Department of
Labor (“DOL”) regarding its oversight
of the June 20, 2006 purchase
of Sierra Aluminum Company
(“Sierra”) stock by the employee
stock ownership plan sponsored by
Sierra (the “Sierra ESOP”), ESOPs
that purchase or sell, contemplate
purchasing or selling, or receive an
offer to purchase or sell employer
securities that are not publicly-traded
(“proposed transaction” or “ESOP
transaction”), must abide by specific
guidelines, including:
1.
Selection and Use of Valuation
Advisor – General –
The DOL
asked the Trustee to prudently
investigate the valuation advisor’s
qualifications. In addition, the
DOL advised the Trustee to
make sure that the valuation
advisor had access to complete,
accurate and current information
in order to perform the ESOP
valuation. In all, the Trustee
should determine whether the
valuation advisor’s advice can be
relied upon.
2.
Selection of Valuation Advisor –
Conflicts of Interest –
The
Trustee’s valuation advisor is
not allowed to accept an
appraisal engagement for an
ESOP transaction if the valuation
advisor previously worked for
the ESOP sponsor, a counterparty
of the ESOP, or an entity that is
putting together the ESOP
transaction for a party other than
the ESOP or the ESOP trustee.
Also, the Trustee is not allowed
to hire a valuation advisor if there
is a familial or corporate
relationship (such as a parent-
subsidiary relationship) with any
party to the ESOP transaction.
3.
Selection of Valuation Advisor –
Process –
The DOL gave a list of
steps that the Trustee should take
when selecting a valuation advisor.
a. The reason for selecting the
particular valuation advisor,
b. A list of all the valuation
advisors that the Trustee
considered,
c. A discussion of the
qualifications of the valuation
advisors that the Trustee
considered,
d. A list of references checked
and discussion of the
references’ views on the
valuation advisors,
e. Whether the valuation
advisor was the subject
of prior criminal or civil
proceedings, and
f. A full explanation of the basis
for concluding that the
Trustee’s selection of the
valuation advisor was
prudent.
The DOL provided an exception if
the valuation advisor was
previously used by the Trustee,
subject to certain conditions.
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Valuation Vantage
Fall-Winter 2014
continued
