NEW YORK (Legal Newsline) — The U.S. Department of Labor announced Aug. 16 that the owner of a Manhattan laser surgery center will pay $5 million to its employee stock ownership plan (ESOP) after allegations of violating the Employee Retirement Income Security Act of 1974 (ERISA) by creating false company valuations.
“Accurate company valuations are critical when it comes to establishing an employee stock ownership plan. Too often company owners seek to inflate the price to benefit themselves at the expense of workers,” said EBSA New York regional director Jonathan Kay.
According to allegations, Dr. Roy Geronemus – owner of the Laser and Skin Surgery Center of New York – allowed an accounting valuation to omit Geronemus’ actual compensation and corporate debt. This led to the ESOP paying too much for Geronemus’ stock in the company.
“This agreement upholds our findings that Geronemus violated his fiduciary duty to the plan and its participants when he caused the Laser and Skin Surgery Center of New York employee stock ownership plan to overpay for the shares,” said regional solicitor Jeffrey S. Rogoff in New York. “It also serves notice to plan fiduciaries that their sole obligation is to protect the interest of the plan participants.”
Handling the case for the department were attorneys Alexander M. Kondo, Michael R. Hartman and Darren Cohen of the Department’s New York Regional Solicitor’s Office.