First Bankers Trust Services, Inc.: Settlement Agreement Analysis

On September 21, 2017, First Bankers Trust Services, Inc. entered into a settlement agreement with the Department of Labor regarding it’s handling of the purchase of Maran, Inc. by the Maran, Inc. Employee Stock Ownership Plan, for which First Bank was the trustee. While the settlement agreement is similar in many respects to the agreement that GreatBanc Trust Company entered into in 2014 with the DOL with respect to its handling of the purchase of Sierra Aluminum Company stock by the Employee Stock Ownership Plan sponsored by Sierra, it includes some material additions.

Since this is the first valuation season following the First Bankers settlement, we believe now is a good time to remind ESOP companies of the items their plan trustees will need to consider as part of that process. While the settlement agreements technically only apply to First Bankers and GreatBanc, and arose in a litigation context, they are being incorporated into the ongoing fiduciary responsibility of trustees more generally. Thus it’s reasonable to expect that most ESOP
Selection and Use of Valuation Advisor – General. This section describes the steps the ESOP trustee must take in order to have acted prudently in selecting the valuation advisor. In addition to the steps previously required under the GreatBanc settlement, the First Bankers settlement requires that a trustee document what steps it took to determine that the valuation advisor has received complete, accurate, and current information and to ensure the trustee understood the advice of the valuation advisor.

B. Selection of Valuation Advisor – Conflicts of Interest. The ESOP trustee must ensure that the valuation advisor has not done work for the ESOP sponsor or any other party involved in the transaction (other than the ESOP and its trustee). The First Bankers settlement species that this includes any committee of employees of the plan