Porter Bancorp in Louisville, Ky., has agreed to pay $1.1 million to settle a lawsuit alleging mismanagement of a former client's employee stock ownership plan.
The $1 billion-asset company's PBI Bank had served as trustee for the ESOP of Miller's Health Systems, a Warsaw, Ind., operator of long-term care and assisted-living facilities. The U.S. Labor Department accused PBI Bank of advising the ESOP to purchase stock in Miller's Health Systems at a price higher than fair value. The advice was not given for the primary benefit of the plan participants, the Labor Department said.
The $1.1 million settlement will be paid to the ESOP to restore losses to the plan's participants. PBI also agreed to pay $83,750 directly to Miller's Health Systems, and to pay penalties of $113,636 to the Labor Department.
PBI Bank also agreed to a permanent ban on serving as a fiduciary or service provider to any plan covered under the Employee Retirement Income Security Act, "except in very limited circumstances," the Labor Department said in a news release. It did not provide details on the limited circumstances.
The settlement will not impact Porter's financial condition or operating results, the company said in a news release. The settlement funds will come from Porter's legal reserves or from insurance.