The Honorable John B. Jones, United States District Judge for the District of 1 South Dakota, sitting by designation. United States Court of Appeals FOR THE EIGHTH CIRCUIT

_____________ No. 97-2153

_____________ Alexis M. Herman, Secretary of the * United States Department of Labor, * * Plaintiff - Appellant, * * v. * * Appeal from the United States Mercantile Bank, N.A., * District Court for the * Eastern District of Missouri. Defendant - Appellee, * * Lenco, Inc., Employees' Stock * Ownership Plan & Trust, * * Defendant - Appellee. *

_____________ Submitted: January 12, 1998 Filed: May 1, 1998

_____________ Before BOWMAN and BRIGHT, Circuit Judges, and JONES, District Judge. 1

_____________ BOWMAN, Circuit Judge.The Secretary also named the ESOP as a defendant, so that full relief could be 2 granted. The Honorable Edward L. Filippine, United States District Judge for the Eastern 3 District of Missouri. -2- Lenco, Inc., was a closely held corporation in Jackson, Missouri, tha t manufactu red a variety of products. In 1984, Mercantile Bank was the trustee o f Lenco's Employees' Stock Ownership Plan (ESOP), a plan under which Lenc o employees owned Lenco stock . On April 5, 1984, Mercantile, acting as trustee of the ESOP, sold the ESOP's stock in Lenco to Jerry Ford in one of several transactions by
means of w hich Ford acquired all of Lenco's stock. Later that day Lenco's ESO P Committee appointed Paul Mueller to replace Mercantile as trustee of the ESOP. The following day, Mueller had the ESOP buy back from Ford the Lenco stock it had sold him the day befor e, for the same price for which it had sold that stock. In the lat e 1980s Lenco began to experience financial probl ems, and on June 20, 1989, it filed for bankrup tcy. Following Lenco's bankruptcy, the ESOP lost the vast majority of it s funds.
The Secretary of Labor subsequently brought t his suit against Mercantile Bank, 2 alleging that Mercantile was liable under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. §§ 1001-1461 (1994), for the ESOP's buy-back of Lenc o stock. The Secretary al leged that Mercantile continued to have fiduciary duties to the ESOP despi te the appointment of Mueller as successor trustee and thus was liable , although Mercantile did not itself conduct the buy-back, because Mercantile failed to take action to prevent it and also because Mercantile failed to amelio rate the buy-back's consequences to the ESOP when it was reappointed trustee of the ESO P after Mueller's death in 19 85. Following a bench trial, the District Court entered judgment fo r 3 Mercantile. The Secretary appeals.-3-

Mercantile can be liable for the buy-back only if the buy-back was unlawful, of
course. And the buy-back was unlawful only if Mueller, who actually conducted the buy-back, violated ERISA i n doing so. The Secretary maintains that Mueller violated ERISA by failing adequately to investigate the value of the stock and by purchasing the stock for mo re than its fair market value, thereby breaching his fiduciary duties to the ESOP.
ERISA provides that an ESOP may purchase empl oyer stock only for "adequate considerat ion," which is defined as "in the case of an asset other than a security fo r which there is a g enerally recognized market [Lenco stock was such an asset because Lenco was a closely held corporation], the fair market value of the asset as determined in good faith by the trustee." 29 U.S. C. §§ 1108(e)(1), 1002(18)(B). Even if a trustee fails to make a good faith effort to determine the fair market value of the stock, "he is in sulated from liability if a hypothetical prudent fiduciary would have made the same decision a nyway." Roth v. Sawyer-Cleator Lumber Co. , 16 F.3d 915, 919 (8th Cir

. 1994). Thus, if a prudent trustee would have purchased the Lenco stock for the price fo r which Mueller purchased it, then Mueller did not violate ERISA, regardless o f whether he made a good faith effort to determine the fair market value of the stock.

In the tr ial, two expert witnesses, one called by the Secretary and one b y Mercantile, presented opinions on the value of Lenco stock at t he time of the buy-back. These experts came to very different conclusions. Mercantile's expert testified tha t Mueller paid less than the fair market value of the stock, where as the Secretary's expert testifiedthat Mueller overpaid. After hearing these witnesses, the District Court concludedthat "[e]ach expert was credible, and each expert's methodology wa s sufficient to survive review." Reich v. Mercantile Bank, N.A. , No. 1:91CV00011 ELF, Memora ndum

and Order at 58 (E.D. Mo. Feb. 28, 1997). The court remaine d uncertain as to the precise value of the stock an d as to whether Mueller paid too much. The court stated that Mueller "possibly, but not necessarily," overpaid by as much as 12.6 percent for the stock. Id. at 60. The court also found that the fair market value-4-

of the stock, whatever it was precisely, was sufficiently close to what Mu eller paid that,
eve n if Mueller did overpay slightly, Mueller had no reason to know that he wa s overpaying. This amounts to a finding that a hypothetical prudent fidu ciary in Mueller's place could have and would have paid what Mueller paid for the stock.
The Secretary contends that the District Court wrongly determined the value of the stock. The determination of the value of the stock is a finding of fact, and w e revie w it for clear error. See Fed. R. Civ. P. 52(a). Mueller, acting for the ESOP , boughtth e stock from Ford at the same price at which Ford had bought it from th e ESOP the day before. The Secretary maintains that in so doingMueller paid too much, beca use the value of Lenco stock had decreased during Ford's acquisition of Lenc o since Lenco had incur

red substantial debt during the course of the acquisition. It may or may not be true a s a general matter that, all other things being equal, an increase in debt reduces the value of a company's stock. But the record shows that all things were not equa l here. Lenco used most of the debt it incurred on April 5 to redeem man y shares of its stock, also on April 5. As a result of the redemption, the ESOP, which had owned 33 .3 percent of Lenco's stock before Ford's acquisition, acquired 63.2 percent of Lenco's stock in the buy-back. Thus by selling its stock in Lenco and then buying it back at the same price, the ESOP was able almost to double its stake in Lenco

. Mercant ile's expert, taking into account Lenco's likely future earnings as of April 6 , 1984, testified that the ESOP thereby improved its financial position. The Secretary's expert, moreover, admitted that a de crease in the value of a company's stock due to an increase in that company's debt may be offset by using the debt to redeem stock an d thus to le ave the remaining stockholders in ownership of a larger percentage of th e company. The record thus amply supports the District Court's finding that Mueller paid fair market value or very close to it for the stock.
Furthermore, the Distr

ict Court did not err in concluding that, although Mueller might ha ve overpaid for the stock, he had no reason to know that he was overpaying. Determining the value of a company's stock is not an exact scien ce. This is particularlyLege ndrelated to the "Three Wise Monkeys" carved over door of Sacre d 4 Stable, Ni kko, Japan, in Bartlett's Familiar Quotations 919 (Emily Morison Beck ed., 15th ed. 1980). -5- tr ue of the stock of a closely held corporation such as Lenco, because there is n o continu ously operating market for such stock. In order to hold that Mueller did no t violate ERISA in conducti ng the buy-back, the District Court did not need to find that Muelle r bought the stock for exactly, to the penny, its fair market value; the Court merely needed to find that a prudent fiduciary in Mueller's place would have paid what Mueller p aid. That is what the District Court found. We conclude that the Distric t Court di d not clearly err in finding that the value of the Lenco stock was such that a prudent fiduciary in Mueller's place would have bought the stock for the price tha t Mueller paid. Accordingly, Mueller did not violate ERISA in conduc ting the buy-back. Because the buy-back was not in violati on of ERISA, Mercantile, on any theory of the case, cannot be liable for it under ERISA. We therefore need not address the issues
concern ing Mercantile's conduct and whether that conduct was such that Mercantil e was legally responsible for the buy-back.
We affirm the judgment of the District Court.
BRIGHT, Circuit Judge, dissenting.

I dissent.
Mercantile Bank as trustee for the Employee Stock Ownership Plan ("ESOP") for Lenco, Inc. employees, perf ormed its role so as to "hear no evil, see no evil, speak no evil." As a result, the employees of the now bankrupt Lenco have lost a portion of

4 their retirement nest egg represented by ESOP stock in Lenco. In my view, Mercantile violated its duty of trust to the employee beneficiaries of Lenco's ESOP.-6-

Me rcantile Bank focused on its own sales commission bottom line and th e interests of testamentary trusts but disregarded the requirements and needs of th e beneficiaries of Lenco's ESOP. As a matter of law, on the undisputed fac ts of this case, Mercantile violated its trust and fiduciary duties to the employee beneficiaries of the ES OP. Mercantile negotiated a sale of all of Lenco's stock to a third party wh o mortgagedall of the assets of Lenco. Such a sale was adverse to the interests of the employee stockholders as we explain below. That sale, however, amounted to a bonanza to the testamentary trusts beneficiaries also represented by Mercantile

. Mercantile allo wed the interests of the ESOP beneficiaries in Lenco to lose out to the tes tamentary trusts beneficiaries' interest in selling Lenco and its own interest i n obtaining the maximum sale commission for selling all the stock of Lenco.
I would reverse and remand for an award of damages.

I. BACKGROUND

Under ERIS A, Congress defined an ESOP as a tax-qualified bonus plan that is desig ned to invest primarily in employer securities. ERISA § 407(d)(6), 29 U.S.C. § 1107(d)(6). Congress exem pted ESOPs from the general requirements of ERISA that pension plans be diversif

ied. The following three significant tax subsidies apply to an ESOP: "first, employers can deduct contributions to ESOPs; second, income earned by th e plan is not taxed until distribution; third, employees can utilize certain rollove r provisions not norm ally available to non-pension plan compensation to avoid taxation
on distribution." Note, Are All ERISA Fiduciaries Created Alike?: Moench v

. Robertson , 58 U. Pitt. L. Rev. 255, 258 (1996). Congress encouraged the growth of ESOP s to increase worker productivity and as a vehicle of social benefit and refor m whereby workers can own part of the nation's productive assets. Id.

Lenco established its ESOP on April 1, 1974 as an employee benefit plan and employee stock ownership plan within the meaning of ERISA. Mercantile Bank acted-7-

as tr ustee of the ESOP from approximately 1974 until April 5, 1984 when it resigned forsever al months. Mercantile resumed its role as trustee beginning approximatel y February 198 5. As trustee, Lenco constituted a fiduciary with respect to the ESO P within the meaning of ERISA § 3(21), 29 U.S.C. § 1002(21).

Paul L eonard owned and operated Lenco until his death in April 1981. Upo n Leona rd's death, Mercantile became trustee to two testamentary trusts established by Leonardwhich held the majority of the voting stock in Lenco as its primary asse t (collect ively, "testamentary trusts"). Jack Niemeyer, an Assistant Vice President i n Mercant ile's trust department, represented both the ESOP and the testamentary trusts on Lenco's board of directors.
In 1983, Lenco's board of directors decided to sell Lenco. Mercantile conducted a formal valuation of Lenco and determined that the value of all of Lenco's outstanding shares, plus the cost of co ordinating the sale of such shares, totaled approximately ten million dollars. Lenco's board of direc tors agreed to set this figure as the asking price. The fixed costs of the sale estimated at $210,000 were to be paid to Mercantile for the negotiation and completio n of the sale of Lenco stock. Lenco's board determined that each of the 512,683 outstanding shares would be worth approximately $19.10.

Alt hough, twenty or thirty parties originally expressed interest in purchasin g Lenco, only four parties tendered an offer. As of February 29, 1984, Jerry Ford was th e only prospective buyer to meet the asking price subject to the condition tha t Mercantil e receive "cash" for all those shares it held in trust. Shortly after Lenco' s boar d accepted Ford's offer, Mercantile learned that Ford would be financing th e transacti onin part, but Mercantile determined that its condition for cash paymen t
rema inedsatisfied. Mercantile denies that it was then aware of Ford's plan for th e ESOP to buy back all the shares from Ford with the ESOP's funds from the previous da y's sale. Ford provided Mercantile with a copy of a two paragraph, preliminary
com mitment letter from his financing bank, Unibanc. The letter neglected to identifyThe Unibanc loan was secured by a general lien on all of Lenco's assets , 5 includi ng the company's real estate, fixed assets and accounts receivable. Marin e Midland Bank later purchased the asse t-based lending division from Unibanc. Marine Midland Bank placed even further restrictions on Mercantile's use of assets and cash. -8- any terms of the loan, its amount, its borrowing formula, or the interest rate. 5 Merca ntile did nothing further to verify the financial feasibility of Ford's takeover o f Lenco.
Before the closing, Ford told Mercantile that he w as experiencing difficulty with arranging financing for his proposed acquisition. Ford proposed the followin g alternatives: Mercantile agree not to sell the ESOP's Lenco stock at the direction of the Lenco ESOP committee; Mercantile agree to sell the ESOP's Lenco stock to Ford, but to repurchase the same number of shares of Lenco stock as it sold for the same price a day later; or Mercantile agree to resign as trustee.
Ford also proposed th at Mercantile sell him the ESOP stock and, after the sale, have a new trustee appointed to buy it back from him for the same price. During the
ne gotiations leading up to the sale, Mercantile refused to change the terms of th e transaction or to buy back the ESOP shares.

On April 5, 1984, Mercantile sold the ESOP stock and the two testamentar y tru sts' stocks to Ford for $19.10 per share. Mercantile received the negotiate d commission of $200,000 for its services. On the same day as the sale, Mercantil e attemptedto resign as the ESOP trustee. Ford selected Paul Mueller, who served as Lenco's g eneral counsel and corporate secretary, to replace Mercantile as the ESO P trustee. Mercantile did not investigate whether Mueller would be a suitabl e replacement

as trustee nor inquire as to his intentions. On April 6, 1984, Mueller as trus tee bought back the same shares of stock for the same price per share that th e-9-

ESOP had sold its shares to Ford on April 5, 1984. The price for the shares on both occasions was approximately three million dollars. No evidence demonstrated thatFor d received $19.32/share for his stock, for a total of $4,076,510. Thi s 6 redemption and t

he sale back to the ESOP allowed Ford to purchase Lenco with little personal debt. Ford's remaining Lenco shares gave him control of th e corporation. The ESOP before and after the transaction only owned non-voting shares of Lenco. Some computations might show some equity after the sale to Ford and th e 7 complet e mortgaging of Lenco's assets. But in any event, the book value had bee n greatly reduced as Lenco became saddled with heavy debt. -10- M u eller performed any independent research or evaluation of the buy-back. Mueller merely discussed the buy-back with Ford and Ford's attorney, Joe Russell. For d testified that he and Russell never discussed having an apprais al of the stock performed before the ESOP bought back the stock because, in Ford's view, the price of the stock was established by his purchase the day before.

Before th e ESOP sold its stock to Ford, the ESOP owned 33.3% of th e outstanding stock. The next day, when the ESOP bought back the stock for the same price per share, it owned 63.2% of the outstanding sto ck because Lenco had used most of th e proceeds of the Unibanc loan to Lenco to redeem 230,826 of its previousl y outstanding shares mostly held by Ford. Even though the ESOP now owned a greater 6 stake in Lenco, Lenco now had extraordinary debt, restrictions on its cash flow as a condi tionof the Unibanc loan, and greatly reduced equity. Before the leverage d buyout, Lenco's total liabilities equaled $1,917,442. After the buyout, Lenco's tota l liabilities tripled to an amount exceeding s ix million dollars. Before the buyout, Lenco rep orted an equity (book) value of $5.4 million. The Unibanc loan of $5.25 millio n almo stwiped out this equity. Ford added no assets or other equity as part of th e buyout. Thus, Lenco went from a substant ial business with over five million dollars in equity to a corporation with great debt and practically no equity. 7-11-

II. DISCUSSION
A district court's findings of fact are rev iewed for clear error. Prince v. Sargent , 960 F.2d 720 , 720 (8th Cir. 1992) (per curiam). Conclusions of law and mixe d questions of law and fact are reviewed de novo
. Cooper Ti re & Rubber Co. v. St. Paul Fire & Marine Ins. Co. , 48 F.3d 365, 369 (8th Cir. 1995).

This court in Martin v. Feilen , 965 F.2d 660, 664 (8th Cir. 1992), stated tha t "[b]or rowing from trust law, ERISA imposes high standards of fiduciary duty upo n th ose responsible for administering an ERISA plan and investing and disposing of its
as sets." Under ERISA § 1104(a)(1), "the ERISA fiduciary must act 'solely in th e interest of the participants and beneficiaries' of the plan, 'for the exclusive purpose' of prov iding benefits to them, and 'with the care, skill, prudence, and diligence' of a 'prudent man acting in a like capacity and familiar with such matters.'" Id. at 670.
ERISA §§ 406(a)(1)(A) and (D), 29 U.S.C. §§ 1106(a)(1)(A) and (D), prohibit a plan from buying or sellingsecurities issued by the plan's employer sponsor because suchtransactions carry an inherent risk of "self-dealing" and "conflicts of interest. " However, Congress created § 408(e) of ERISA, 29 U.S.C. § 1108(e), to provide a narrow exemption to the § 406(a) prohibition. Section 408(e) permits employee benefit plans t o purchase or sell employer securities only if the sale or purchase of th e
sec urities is for adequate consideration. The definition of "adequate consideration " under ERISA imposes a two-fold requirement: (1) the price paid must reflect the fair
ma rket value of the asset, and (2) the trustee must conduct a careful and independent investigationof the circumstances prevailing at the time of the investment. Donovan v. Cunningham , 716 F.2d 1455, 1467-68 (5th Cir. 1983).
The district court erred as a matter of law in concludingthat a conflict of interest di d not exist and that Mercantile did not have a duty to make an independen t investigation of the transactions at issue. A conflict of interest existed both before-12-

Lenco's boa rd decided to sell the corporation and during the sale transaction. Th e district court noted that both the ESOP beneficiaries and the testamentary trust s beneficiaries wanted the maximum amo unt per share of Lenco stock. However, a sale of the ES OP stock at the maximum amount per share did not constitute the primary obje ctive of the ESOP beneficiaries. A conflict of interest between the ESO P ben eficiaries and the testamentary trusts beneficiaries existed because the ESO P beneficiaries as employees were primarily interested in Lenco continuing as an ongoing profitable business providing them employment and an increase in stock ownership.
"When a fiduciary has dual loyalties, the prudent per son standard requires that he make a careful and impartial investigation of all investmen t de cisions." Schaefer v. Arkansas Medical Soc’y , 853 F.2d 1487, 149 2 (8th Cir. 1988), citing Donovan v. Bierwirth , 680 F.2 d 263, 271 (2d Cir.), cert. den ied , 459 U.S. 1069 (1982). Thus, the ESOP fiduciary is no t prohibited from being on both sides of a transaction involving the ESOP’s assets, but he must serve both masters (or at least the ESOP) with th e utmost care and fairness.

Martin , 965 F.2d a

t 670. The sale of ESOP stock and the proposed leveraged buyout of Lenco obviously affected the future and financial soundness of Lenco. As trustee of t he ESOP, Mercantile had a duty to investigate the proposed transaction and th e transferee with care.

The district court erred in co ncluding that the sale of stock on April 5, 1984 did not constitute the type of “invest ment” which triggers close investigation mandated by Martin

. Th is court has concluded that "ERISA imposes high standards of fiduciary duty upo n those responsible for administering an ERISA plan and investing an d disposingof its assets." Martin , 965 F.2d at 664 (emphasis added). Especially in the
con text of an ESOP, the disposition of stock in the employer company constitutes a type of investment which must be in the best interests of the beneficiaries. In this case,-13-

the ESOP plan document contemp lated investment only in Lenco stock. Accordingly, any removal of that stock from the ESOP trust should trigger high scrutiny by a fiduciary.

When Lenco's board st arted to discuss a sale of Lenco, Mercantile should have resigned as trustee of either the ESOP trust or the testamentary trusts. Mercantile failed to recogni ze that the ESOP beneficiaries had different interests than those of othe r st ockholders. The ESOP beneficiaries as employee stockholders were primaril y interested in having a going corporation with a solid financial base. Congress created ESOPs as a statutory pension program designed to promote investment of employe e retirement as sets in the stock of the employer. In fact, courts have recognized a presumption in favor of finding ESOP fiduciaries acted prudently w hen they invest only in the stock of the empl oyer. Moench v. Robertson , 62 F.3d 553, 571 (3d Cir. 1995), cert. denie d , 516 U.S. 1115 (1996). In this way, ESOP programs allow a shift i n ownership of the nation’s productive assets to wor kers. This program can serve a dual purpose. High productivity by employees benefits both the employer and th e employees themselves as beneficiaries of an ESOP because high prod uctivity ordinarily improves profitability.

The tes timony by the Secretary’s expert, Dr. Murray, further demonstrated the
con flict between the interests of the testamentary trusts beneficiaries and the ESO P beneficiaries. Dr. Murray testified that a conflict existed due todifferent time horizons. The ESOP beneficiaries looked for growth and development on a l ong-term basis while th e testamentary trusts beneficiaries wanted current income and a highly liqui d company. Dr. Murray concluded that the differences between the needs and objectives of the testamentary trusts beneficiaries and the ESOP beneficiaries were so clear and persistent that no trustee should have served both beneficiaries. This testimony is in accord with the statutes and legislative history relating to ESOPs.The district court incorrectly stated that the Secretary wanted to hold Mercantile 8 liable because the scheme left Lenco highly leveraged which ultimately lead to it s bankruptcy. The argument made by the Secretary did not focus upon the eventua l ban kruptcy of Lenco in 1989. Rather, the Secretary presented the argument tha t Mercantile should be held liable for a transaction that was not in the best interests of the beneficiaries in 1984. -14- After deciding to sell Lenco, Mercantile committed its second breach of fid uciary duty by failing to investigate whether the details of the sale transaction woul d advantag e the ESOP employee beneficiaries. Specifically, Mercantile failed t o 8 in vestigate the financing arrangement and the qualifications of the new owner

. Merc antile ignored numerous warning signs that Ford could not afford to have th e ESOP included in the sale and that Ford did not have the experience to lead th e company.

Mer cantile did not investigate at all the propriety of a sale to Ford given th e heavy Unibanc financing. Dr. Murray testified that Mercantile as a prudent fiduciary should have reviewed the loan agreement, the history of the transac tion with the buyer's represen tatives, the borrowing formula, and satisfied itself that Ford had the financial resources to carry through with the t ransaction. An investigation by Mercantile would have shown no major bank was going to participate in the buy-back. As part of th e dea lfor Ford to buy the ESOP stock on April 5, 1984, a twenty-four-hour loan wa s gua ranteedby a collection of four individuals who called themselves Exchang e Fin ancial Services. Ford paid this loan the next day when Mueller bought the sam e shares back for the ESOP.

Lenco borrowed over five million dollars from Unibanc. In essence over four million dollar s of the Unibanc loan went to Ford to help him acquire Lenco. Tha t money did not benefit L enco, but only Ford personally. Furthermore, the terms of the Unibanc loan demonstrate the difficult financial position Ford imposed upon Lenco.-15-

The Un ibanc loan required a general lien on all of Lenco's assets, including th e company's real estate, fixed assets and accounts receivable.

Mercantil e did not investigate Ford’s background to determine if he coul d ef fectively operate Lenco, a multimillion dollar manufacturing business. A n investigati on would have shown that Ford had no pertinent experience. According to Ford's resume, his previous employment included owning and operating a real estate developme nt

company, operating a funeral home, and serving as a state legislator

. Ford's personal liquid assets consiste d of $5000. As far as Mercantile was concerned, it did not care about the experience or financial acumen of the next CEO of Lenco.

Mercantile breach ed its fiduciary duty to the ESOP by failing to investigate the transaction. After

investigation, a prudent fiduciary in Mercantile's shoes would have stopped the transaction from being completed. Mercantile's conflicting duty to th e testamentary trusts, which had an interest in the Ford transaction being completed and ge tting cash for the stock held by the trusts, caused Mercantile to avoid its duty t o protect the ESOP from participating in a transaction harmful to the interests of th e ESOP. Mercantile obviously desired to get the money for the shares and run fro m further responsibility, which it did.

M e rcantile committed a third breach of fiduciary duty when it failed to correct the harm caused by the stock buy-back when it resumed trusteeship of the ESOP. The district court clearly erred by determining that the stock buy-back by Mueller for the ESOP constituted a prud ent transaction for adequate consideration. In calculating the fair market value of Lenco, the district court clearly erred by not ta king into account theInaddition, in a bankruptcy action, the parties stipulated that the ESO P 9 purchase of the stock was for more than adequate consideration and would subjec t Lenco to liability. In re Lenco, Inc. , 116 B.R. 141, 143 (Bankr. E.D. Mo. 1990). -16- extraordinary debt. Moreover, I think the expert testimony at the trial as to the value 9 of the stock is relatively immaterial. The district court should have valued the-17-

ESOP stock according to the formula in the ESOP pla n document. This formula called for a combination of a pric e-earnings and a book value method of valuation. With the extraordinary debt, the book value approache d zero. The price-earnings based on past performanc e were not reliable, as Ford, a new person without experience, was taking control of L enco. The value of the corporation was obviously greatly lessened. A court does not need a

n expert witness to either demonstrate or refute what is obvious.
Mercantile successfully asserted in the district court that Mueller paid f air market value for the former ESOP stock. That contention and the district court's confirming conclusion fl ies in the face of reality. The real issue is whether Mercantile or an y prudent trustee would consider the stoc k to have the equivalent value on April 6, 1984 as it did on April 5, 1984. On April 5, 1984, the corpo ration was a successful business with good leadership and little debt, but the next day, the corporation had unteste d leadership and heavy debt. Notwithsta nding that the ESOP almost doubled its interest in the comp any, the company's value was far less and the ESOP lacked control of the company. I suggest a trust company or investment advisor making this sort of business decision would be short-lived. Interestingly, prior to the sale of the stock, Mercantile rejected Ford's overtures that Mercant ile as trustee buy back the ESOP shares one day after the sale. If the buy-back did not serve the best interests of the employees then, that action cannot be justified in this lawsuit. Thus, I conclude that, as a matter of law on the undisputed facts, the stock buy-back constituted an imprudent investment.

III. CONCLUSION
The district court erred in concluding that Mercantil e did not breach its fiduciary duties of loyalty and prudence when it failed to appoint a new independent trustee or to investi gate the proposed sale of ESOP stock to Ford. Moreover, as a matter o f undisputed fact, the buy-back amounted to an imprudent investment by trustee Mueller.-18-

Although the majority absolves Mercantile from liability, the relation in thi s dissent of the facts and law may serve some beneficial purpose. The courts, I believe, shouldtake a hard look at those individuals or corporations who manipulate ESO P shares for th e advantage of people other than the employee beneficiaries. Fiduciaries sh ould carefully safeguard the interests of the ESOP beneficiaries in ESOP plans. I would remand this cas e to determine an appropriate amount of damages to be paid by Mercantile for its breaches of fiduciary duty.
A true copy.

Attest:
CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT