Using an Account Balance to Offset Damages Resulting from a Fiduciary Breach

ESOP Benefits of Fiduciary Who Breached His Duties Can Offset Plan Loss discusses Pension and Employee Stock Ownership Plan Administrative Committee of Community Bancshares Inc. v. Patterson, N.D. Ala., No. CV-04-BE-00531-S, 3/31/08, which determined that a plan committee member breached his fiduciary duty by failing to disclose his criminal acts against his company to the plan committee:

"Patterson committed fraud against the company, engaged in fraudulent accounting, concealed that fraud from the ESOP administrators and ESOP plan participants, and encouraged the continued purchase of company stock," the opinion said.

The court further said that Patterson not only committed fraudulent acts but also "knowing the Plan's investment had been impaired by [his] own fraudulent acts, . . . failed to take any steps to protect the Plan's assets. . . ."

The court also ruled that the fiduciary's account balance could be used to pay damages to the Plan.