Marty Walsh v. Adam Vinoskey, 19 F.4th 672

Adam Vinoskey founded Sentry; in 1993 Sentry established an ESOP that gradually acquired company stock. By 2010 the ESOP owned 48% and the Vinoskeys owned the remaining 52% through the Adam Vinoskey Trust; Vinoskey was Sentry CEO and an ESOP trustee.
To sell his remaining shares to the ESOP, Sentry retained Evolve Bank & Trust as an independent fiduciary to represent the ESOP.
In 2010 the ESOP purchased the Vinoskeys’ remaining 51,000 shares for $20,706,000 ($406/share): ~$10.4M cash and a ~$10.3M promissory note; in 2014 Vinoskey forgave $4,639,467 of that ESOP debt.
The Secretary of Labor sued, alleging the sale was a prohibited ERISA transaction because Vinoskey was a party-in-interest and the ESOP overpaid; district court held a bench trial, found fair market value was $278.50/share, and held Evolve and Vinoskey liable; district court awarded $6,502,500 in damages and declined to offset the loan forgiveness.
On appeal the Fourth Circuit affirmed Vinoskey’s liability as a "knowing participant" under ERISA § 502(a)(5) but reversed the damages ruling, ordering an offset for the $4,639,467 forgiveness and reducing Vinoskey’s joint-and-several liability to $1,863,033.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Vinoskey "knowingly participated" in a fiduciary breach by causing the ESOP to pay more than FMV	Secretary: Vinoskey had actual or constructive knowledge of valuation circumstances (prior appraisals, reviewed files, participated in meetings) so he knowingly participated	Vinoskey: lacked expertise, relied on appraisers, thought price/premium reasonable and did not know $406 exceeded FMV	Court: Affirmed — district court’s inference that Vinoskey knew price was inflated was not clearly erroneous; liability under § 502(a)(5) affirmed
Whether damages should be reduced/offset by Vinoskey’s later forgiveness of ESOP debt	Secretary: Forgiveness was an independent act unrelated to the prohibited transaction and should not reduce damages	Vinoskey: Forgiveness reduced the ESOP’s actual loss and should offset restitution to avoid a windfall	Court: Reversed district court on damages as a matter of law — offset required; damages reduced by amount forgiven, resulting liability $1,863,033

Harris Tr. & Sav. Bank v. Salomon Smith Barney, Inc., 530 U.S. 238 (Sup. Ct.) (non‑fiduciary liable if it "knowing[ly] participat[es]" — must have actual or constructive knowledge of circumstances rendering transaction unlawful)
Brundle ex rel. Constellis v. Wilmington Tr., N.A., 919 F.3d 763 (4th Cir.) (general rule for ESOP restitution: damages = amount paid minus fair market value; context matters for offsets)
Henry v. U.S. Trust Co. of Cal., 569 F.3d 96 (2d Cir.) (debt cancellation not offset where forgiveness facilitated a resale back to seller; factual context controls offset analysis)
Perez v. Bruister, 823 F.3d 250 (5th Cir.) (unpaid debt can be included in damages calculation; indebtedness has immediate economic consequences)
Intel Corp. Inv. Policy Comm. v. Sulyma, 140 S. Ct. 768 (Sup. Ct.) (actual knowledge may be proved by circumstantial evidence; inferring knowledge from obvious risks is permissible but not required)