Morgan Lewis on ESOPs
May 2005

In this Issue:

• Comments Presented at IRS Hearing on Rule 409(P) Regulations:
  At a public hearing held by the IRS on April 20, 2005, The ESOP Association presented its comments and proposals relating to the New Regulations, covering a number of areas of concern to ESOP-owned companies and ESOP practitioners.
• Court Dismisses Employee's Claim That Firm's Stock Was an Imprudent Investment:
  A lawsuit filed by a former employee against Calpine Corp., its board of directors and members of the company’s retirement plan administrative committee, alleged that the company, the board, and the plan administrative committee breached their fiduciary duties by failing to prudently and loyally manage plan assets and allowing employees to invest their retirement plan assets in the company’s stock. The court dismissed the lawsuit on March 31, 2005.
• Pass-Through Vote May Be Required for Subsidiary Asset Sales:
  Companies, both public and private, often own their assets and operate their businesses through subsidiaries. In such a situation, the parent company is merely a holding company that derives income through its equity ownership in its subsidiaries, and not as a direct result of owning the operating assets.
• Calendar of Events

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