Los Angeles, CAEmployees of the Los Angeles Times have reportedly settled their lawsuit, which alleged their ERISA pension plan was used illegally. The ERISA plan lawsuit, which alleged violations of federal law, was settled with GreatBanc Trust for a reported $32 million. Plaintiffs in the ERISA benefits lawsuit claimed their employee pension plan was used to help Sam Zell take over the LA Times.
According to The New York Times, employees of the Los Angeles Times alleged that their pension plan was used by Zell to leverage a buyout of the company by creating an employee stock ownership plan, taking advantage of the tax benefits and altering the Tribune Company's debt. One year later, the Tribune Company went bankrupt.
The lawsuit was filed in 2008 against Zell, the Tribune Company and GreatBanc, which acted as the trustee for the employee stock ownership plan. Claims against Zell and the Tribune Company were later dismissed. Among the allegations were that GreatBanc's actions violated the Employee Retirement Income Security Act of 1974 (ERISA). An earlier court decision against GreatBanc, which found that the company violated pension laws with its actions, may have helped the employees obtain a settlement.
Approximately 13,000 current and former Tribune employees will split the settlement. The Tribune Company publishes the Chicago Tribune and the Los Angeles Times. The settlement reportedly resolves claims made by the Department of Labor regarding the employee stock option plan. The Wall Street Journal notes that both the Department of Labor and GreatBanc also objected to the Tribune Company's proposed reorganization plan. Those objections were resolved with the settlement.
In 2007, Sam Zell undertook a leveraged buyout of Tribune Co. The complicated deal involved the creation of an employee stock ownership plan, which was administered by GreatBanc. By creating the employee stock ownership plan, Zell reportedly placed all the risk for buying the Tribune Company on the employee pension plan, even though the pension plan shared ownership of the company with Zell. When the company went bankrupt, the employee pensions were devalued and the stock was worthless.
Insurers will pay approximately $26.5 million, while Tribune will pay $4.5 million and GreatBanc Trust will pay $1 million.
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