NYC business owners settle ESOP fraud case for $10 million — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
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NYC business owners settle ESOP fraud case for $10 million

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in Employment Law,Human Resources

The former owners of People Care Holdings, which provides in-home health services in and around New York City, have agreed to pay $10 million to settle charges they sold company stock to employees at inflated rates.

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’s Employee Benefits Secu­­rity 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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