On February 12, 2009, the Laser and Skin Surgery Center of New York ESOP (the “LSSCNY ESOP”) purchased 50.06% (i.e., 400,480) of the outstanding shares of the Laser and Skin Surgery Center of New York Management Corp. (LSSCNY), a New York corporation that operates a dermatological surgery center, for $24 million.
The DOL filed a complaint on February 11, 2015, alleging that (i) Samuel Ginsberg (Ginsberg), the LSSCNY ESOP’s trustee, did not meaningfully review Trenwith Valuation, LLC’s (Trenwith) valuation report or understand or question the report’s methodologies or conclusions, thereby causing the LSSCNY ESOP “to overpay for the LSSCNY stock by an amount millions of dollars above fair market value”; and (ii) Roy Geronemus (Geronemus) appointed Ginsberg as the LSSCNY ESOP’s trustee, despite Ginsberg never having served as an ESOP trustee previously, and contributed to Ginsberg’s breaches of fiduciary duties.
The DOL, Geronemus, and Ginsberg settled all matters between them via a Consent Order and Judgment entered on July 25, 2017.1 In accordance with the Consent Order and Judgment, (i) Geronemus agreed to pay $5 million to the LSSCNY ESOP; (ii) Geronemus agreed to pay an ERISA § 502(l) penalty in the amount of $500,000; (iii) Geronemus waived all rights to collect any accrued but unpaid compensation under his February 11, 2009 Employment Agreement, and he agreed to a prospective compensation limit for as long as the LSSCNY ESOP held shares of LSSCNY’s stock; and (iv) Geronemus and Ginsberg were permanently enjoined from serving as fiduciaries of, or service providers to, any ERISA-covered employee benefit plan. The case is closed.
Takeaways
- Ginsberg, the LSSCNY ESOP’s trustee, did not meaningfully review or question Trenwith’s valuation report.
- Geronemus agreed to pay $5 million to the LSSCNY ESOP.
- Pursuant to ERISA § 502(l), a civil penalty of $500,000 was imposed upon Geronemus.
1 Consent Order and Judgment, Acosta v. Ginsberg, No. 1:15-cv-00985-AJN (S.D.N.Y. July 25, 2017), ECF No. 92.
