ESOP Plan Sponsor Held Liable for Issuance of 10-Year Note to Satisfy Repurchase Obligation

In a case recently decided by a federal district court in Indiana, Craig v. Smith, 2009 WL 438635 (S.D. Ind. Feb. 20, 2009), Ontario Corporation was held to have violated ERISA by issuing a 10-year promissory note in payment for shares that had been credited to the account of a former employee, Charles A. Craig, under the company’s employee stock ownership plan (ESOP), as it violated the requirement that the term of any note issued in satisfaction of a terminated ESOP participant’s put right could not exceed five years.

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