The Labor Department has charged a St. Paul bank holding company and its trust affiliate of shortchanging employees through a profit-sharing plan.
Bremer Trust's plan is based on the per-share book value of its parent, privately held Bremer Financial Corp. That denies employees the benefit of rising market prices for bank stocks, the department contends in a lawsuit filed with the U.S. District Court in Minneapolis.
Employees get to buy shares of $3.1 billion Bremer Financial at book value when they come available. The shares can be resold only back to the plan itself, and again only at book value.
Eight percent of the stock has been set aside for the plan. The rest is held by the charitable Otto Bremer Foundation, which the bank's founder started.
Bremer says it uses book value for the plan because market value is hard to estimate. The Federal Reserve and the Internal Revenue Service approved that choice, said the company's chairman, Terry M. Cummings.
But the Labor Department said federal securities law requires companies to use or impute a market price when estimating the value of shares held for employees.
In 1997, the lawsuit notes, the company reported that the book value of a Bremer Financial share ranged from $21.38 to $23.24. An independent appraiser said it would have been worth $26.35 to $31.20 on the open market, the lawsuit says.
The suit seeks payments to the plan, including interest, but does not specify an amount. It says 1,179 people had been eligible to participate in the plan.
Before the suit was filed, Mr. Cummings said, Bremer had been working with the Labor Department for months to settle the dispute. He predicted a compromise.
A spokeswoman for the Labor Department said it would drop the suit if Bremer restructured the profit-sharing plan and reimbursed employees for any losses sustained.
