FOREST — The former CEO of a packaging equipment company in Forest and an Arkansas-based bank have been ordered to restore $6.5 million to the company’s Employee Stock Ownership Plan.
According to a news release issued Thursday by the U.S. Department of Labor, the U.S. District Court for the Western District of Virginia on Aug. 2 ruled that Adam Vinoskey — the former CEO of Sentry Equipment & Erectors Inc., 13150 E. Lynchburg-Salem Turnpike in Forest — and West Memphis, Arkansas-based Evolve Bank and Trust violated the U.S. Employee Retirement Income Security Act (ERISA). Vinoskey and the bank were ordered to pay back $6,502,500 to Sentry’s Employee Stock Ownership Plan (ESOP), the release said.
The release said an investigation by the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) found that Vinoskey and Evolve Bank and Trust in December 2010 approved the ESOP’s purchase of Vinoskey’s stock at an inflated price. According to the release, the ESOP paid $406 per share for Vinoskey’s 51,000 shares in 2010 even though the company’s stock was appraised at $285 per share in 2009.
Vinoskey — the former owner of the company — sold 48% of his stock to the ESOP in 2004 and the remaining 52% in 2010. Evolve — and Micheal New, the bank’s in-house attorney — oversaw the 2010 sale.
“ESOP’s are a valuable and highly effective tool for helping workers prepare for retirement, but an ESOP must not overpay,” Assistant Secretary of Labor for the Employee Benefits Security Administration Preston Rutledge said in the release. “This is what happened here, and it hurt the workers.”
According to the Sentry website the company employs about 200 people “who specialize in integrating packaging equipment and conveying systems into cost effective and efficient plant designs.”
In October 2016, the U.S. Department of Labor brought suit against Vinoskey, Evolve and New — alleging the ESOP overpaid for company stock and the defendants breached their fiduciary duties under the Employee Retirement Income Security Act by approving the sale.
“Vinoskey and Evolve violated their fiduciary duties by failing to ensure that the ESOP paid no more than adequate consideration for Vinoskey’s stock in the 2010 transaction,” EBSA’s Philadelphia Regional Director Michael Schloss said in the release.
The news release said the court explained in its 100-page decision Evolve Bank failed to notice, question or investigate several red flags that appeared in the appraisal of the stock that was used to set the $406 per share price and Vinoskey violated the ERISA when he accepted a $406 per share price at a time when he knew — or should have known — that Sentry’s stock was worth less.
“Properly administered employee stock ownership plans can provide employees with valuable benefits in retirement,” said Jodeen M. Hobbs, ERISA Regional Counsel for the U.S. Department of Labor in Philadelphia. “To achieve this benefit, however, plan trustees must act in the best interests of the plan participants when reviewing the value of the company stock and not pay more than fair market value.”
On Thursday, U.S. Department of Labor spokeswoman Leni Fortson said the department could not comment on what led officials to launch an investigation into the 2010 stock sale and how long the investigation lasted. However, Fortson, in an emailed statement to The News & Advance, said the Aug. 2 judgement of the court was the result of a civil action and Vinoskey and Evolve Bank were not facing criminal charges.
Les Womack, Sentry’s vice president of engineering — in a statement sent to The News & Advance on Thursday — said the employees of the now employee-owned company were aware of the court’s decision.
“Our employees became aware of the judgement issued by the Western District Court on Tuesday, Aug. 6,” Womack said. “It is our understanding that the verdict was issued in the latter part of the previous week. At this point we have no comment on the proceedings as the parties have the right to appeal the court’s decision to the Fourth Circuit Court of Appeals.”
According to the Sentry website the company was incorporated in 1980 as a mechanical installation service and “Thanks to the drive and vision of Adam and Carole Vinoskey, Sentry Equipment & Erectors, Inc. was soon born.”
Calls to Evolve Bank for comment were not returned Thursday and a number for Vinoskey could not be found.