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Santa Clarita CEO Accused of Misusing Retirement Funds

A Santa Clarita supplier of processing and molding equipment and its chief executive face legal action for allegedly using employee retirement money to prop up the company, the government said Wednesday. The U.S. Department of Labor filed the lawsuit against John Hoskinson, Gruber Systems Inc. and Gruber’s employee stock ownership plan on May 29 in U.S. District Court in Los Angeles. It accuses the defendants of violating federal labor law governing employee stock ownership plans, which give employees equity stakes in their own companies. Hoskinson is alleged to have directed the ownership plan to buy $2.6 million shares in the privately-held company in 2008 and 2009 at an inflated rate. He was the plan’s trustee and administrator and only member of the administrative committee at the time. The plan is funded by employee contributions. Crisanta Johnson, Los Angeles regional director of the department’s Employee Benefits Security Administration, said that using plan funds to prop up struggling companies threatens the financial security of workers and retirees. “Too often, we see employee stock ownership plan funds used illegally by company owners and management to bolster companies,” Johnson said in a prepared statement. The lawsuit claimed that for both the 2008 and 2009 transactions Hoskinson provided “incomplete and unconsolidated financial data” to Cogent Valuation, a valuation services firm in Woodland Hills that appraised the value of the shares. “As a result of the appraiser’s report’s flaws, assumptions and inaccuracies, the values set for Gruber shares of stock during the 2008 transaction and the 2009 transaction were far higher than the stocks’ actual fair market values,” the suit said. The suit seeks a reversal of the $2.6 million in stock transactions, restoring any plan losses and having Hoskinson removed as a fiduciary of the employee plan. As of Dec. 31, 2012, the plan had 189 participants and assets of $601,705, according to the suit. Three years earlier the plan had 194 participants and nearly $4 million in assets. Hoskinson said he would not comment because the matter is in litigation. Gruber supplies fiberglass molds, tools and other equipment used in the fabrication of cultured marble, onyx and composites. In March, Hoskinson was named as the director of the Small Business Development Center at College of the Canyons. The center mentors and provides other support to startup and small businesses in the Santa Clarita Valley and surrounding areas.

Mark Madler
Mark Madler
Mark R. Madler covers aviation & aerospace, manufacturing, technology, automotive & transportation, media & entertainment and the Antelope Valley. He joined the company in February 2006. Madler previously worked as a reporter for the Burbank Leader. Before that, he was a reporter for the City News Bureau of Chicago and several daily newspapers in the suburban Chicago area. He has a bachelor’s of science degree in journalism from the University of Illinois, Urbana-Champaign.
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