Articles Tagged with Appraiser Independence

  • The application of a control premium more than doubled the claimed value of a business purchased its employees through and ESOP

  • An investment banking firm involved in the transaction is subject to claims that it was biased because the fee it earned was contingent on the purchase price.

  • The valuation firm that conducted the annual valuation required by federal regulations faces claims that it was not independent.  


A valuation that applied a control premium to shares acquired by an Employee Stock Ownership Plan (ESOP) would have inflated the value of the now-bankrupt company by as much as 61 percent, according to the plaintiffs in an action against the trustees of the ESOP, its investment bank and the firms that valued the business.

In a case heard by the Seventh Circuit Court of Appeals, the plaintiff’s claims of breach of fiduciary duty and engaging in prohibited transactions under the federal Employee Retirement Income Security Act (ERISA) were upheld even though the defendants wanted to dismiss the complaint. This was because the plaintiff sufficiently alleged wrongdoing in the valuation of the business.

ESOP Owning Bankrupt Company Sues Over Value Reports

The Seventh Circuit Court of Appeals in Appvion Inc. Retirement Savings and Employee Ownership Plan v. Butha held that the plaintiff’s claims for ERISA violations related to the valuation of theA valuation that applied a control premium to shares acquired by an Employee Stock Ownership Plan (ESOP) would have inflated the value of the now-bankrupt company by as much as 61 percent, according to the plaintiffs in an action against the trustees of the ESOP, its investment bank and the firms that valued the business. business after 2012 would proceed.

The gist of the plaintiff’s claims in the lawsuit is that employees approved the acquisition of the stock of the company based on the flawed valuation presented by an investment banking firm that received a contingent success fee of more than $8 million and that the annual valuations of the company were inaccurate and misleading.

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