In December 2010, the Sentry Equipment Erectors, Inc. ESOP (the “Sentry ESOP”) purchased 51,000 of the outstanding shares of Sentry Equipment Erectors, Inc. (“Sentry”), a Virginia corporation that designs and sells soft drink manufacturing equipment, for $20.7 million, thereby becoming the 100% shareholder of Sentry.
The DOL filed a complaint on October 14, 2016, alleging that Evolve Bank and Trust (“Evolve”) and Michael New, one of Evolve’s lawyers, did not adequately review Capital Analysts, Inc.’s (“Capital”) report, which contained “substantial errors,” nor did they consider the fact that the per-share transaction price was 40% higher than the per-share value offered to terminating participants.1 As a result, Evolve and Mr. New caused the Sentry ESOP to pay more than adequate consideration for Sentry’s shares, and the debts incurred through the transaction reduced the fair market value of the shares that had been previously allocated to the Sentry ESOP’s participants.
Takeaways
- Evolve, and, more specifically, Michael New, the Sentry ESOP’s trustee, relied on Capital’s flawed valuation report to approve the transaction.
1 Complaint, Perez v. Vinoskey, No. 6:16-cv-00062-NKM (W.D. Va. Oct. 14, 2016), ECF No. 1.
