Bruce Jacobson and Jerry Lewkowitz, People Care’s former owners, established an employee stock ownership program (ESOP) under which they transferred ownership to employees and received substantial tax benefits.
However, the U.S. Department of Labor’sSecurity Administration (EBSA) found the owners inflated the stock price beyond its legitimate market value.
They will pay the ESOP $9,090,910 plus a civil penalty of $909,090 to settle the matter. EBSA determined the fraud violated the Employee Retirement Income Security Act. Approximately 4,655 employees participate in People Care’s ESOP.
Note: ESOPs can help raise cash and make employees feel they have an ownership stake in the company. But ESOPs also bring added scrutiny from federal authorities.
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