dissenting.
I dissent.
Mercantile Bank as trustee for the Employee Stock Ownership Plan (“ESOP”) for Lenco, Inc. employees, performed its role so *423as to “hear no evil, see no evil, speak no evil.”4 As a result, the employees of the now bankrupt Lenco have lost a portion of 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.
Mercantile Bank focused on its own sales commission bottom line and the interests of testamentary trusts but disregarded the requirements and needs of the beneficiaries of Lenco’s ESOP. As a matter of law, on the undisputed facts of this case, Mercantile violated its trust and fiduciary duties to the employee beneficiaries of the ESOP. Mercantile negotiated a sale of all of Lenco’s stock to a third party who mortgaged all.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 allowed the interests of the ESOP beneficiaries in Lenco to lose out to the testamentary trusts beneficiaries’ interest in selling Lenco and its own interest in 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 ERISA, Congress defined an ESOP as a tax-qualified bonus plan that is designed to invest primarily in employer securities. ERISA § 407(d)(6), 29 U.S.C. § 1107(d)(6). Congress exempted ESOPs from the general requirements of ERISA that pension plans be diversified. The following three significant tax subsidies apply to an ESOP: “first, employers can deduct contributions to ESOPs; second, income earned by the plan is not taxed until distribution; third, employees can utilize certain rollover provisions not normally 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 ESOPs to increase worker productivity and as a vehicle of social benefit and reform 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 as trustee of the ESOP from approximately 1'974 until April 5, 1984 when it resigned for several months. Mercantile resumed its role as trustee beginning approximately February 1985. As trustee, Lenco constituted a fiduciary with respect to the ESOP within the meaning of ERISA § 3(21), 29 U.S.C. § 1002(21).
Paul Leonard owned and operated Lenco until his death in April 1981. Upon Leonard’s death, Mercantile became trustee to two testamentary trusts established by Leonard which held the majority of the voting stock in Lenco as its primary asset (collectively, “testamentary trusts”). Jack Niemeyer, an Assistant Vice President in Mercantile’s trust department, represented both the ESOP and the testamentary trusts on Len-co’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 coordinating the sale of such shares, totaled approximately ten million dollars. Lenco’s board of directors 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 completion of the sale of Lenco stock. Lenco’s board determined that each of the 512,683 outstanding shares would be worth approximately $19.10.
Although, twenty or thirty parties originally expressed interest in purchasing Lenco, only four parties tendered an offer. As of February 29, 1984, Jerry Ford was the only prospective buyer to meet the asking price subject to the condition that Mercantile receive. “cash” for all those shares it held in trust. Shortly after Lenco’s board accepted Ford’s offer, Mercantile learned that Ford *424would be financing the transaction in part, but Mercantile determined that its condition for cash payment remained satisfied. Mercantile denies that it was then aware of Ford’s plan for the ESOP to buy back all the shares from Ford with the ESOP’s funds from the previous day’s sale. Ford provided Mercantile with a copy of a two paragraph, preliminary commitment letter from his financing bank, Unibanc. The letter neglected to identify any terms of the loan, its amount, its borrowing formula, or the interest rate.5 Mercantile did nothing further to verify the financial feasibility of Ford’s takeover of Lenco.
Before the closing, Ford told Mercantile that he was experiencing difficulty with arranging financing for his proposed acquisition. Ford proposed the following 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 that 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 negotiations leading up to the sale, Mercantile refused to change the terms of the transaction or to buy back the ESOP shares.
On April 5, 1984, Mercantile sold the ESOP stock and the two testamentary trusts’ stocks to Ford for $19.10 per share. Mercantile received the negotiated commission of $200,000 for its services. On the same day as the sale, Mercantile attempted to resign as the ESOP trustee. Ford selected Paul Mueller, who served as Lenco’s general counsel and corporate secretary, to replace Mercantile as the ESOP trustee. Mercantile did not investigate whether Mueller would be a suitable replacement as trustee nor inquire as to his intentions. On April 6, 1984, Mueller as trustee bought back the same shares of stock for the same price per share that the 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 that Mueller performed any independent research or evaluation of the buy-back. Mueller merely discussed the buy-back with Ford and Ford’s attorney, Joe Russell. Ford testified that he and Russell never discussed having an appraisal 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 the ESOP sold its stock to Ford, the ESOP owned 33.3% of the 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 stock because Lenco had used most of the proceeds of the Unibanc loan to Lenco to redeem 230,826 of its previously outstanding shares mostly held by Ford.6 Even though the ESOP now owned a greater stake in Lenco, Lenco now had extraordinary debt, restrictions on its cash flow as a condition of the Unibanc loan, and greatly reduced equity. Before the leveraged buyout, Lenco’s total liabilities equaled $1,917,442. After the buyout, Lenco’s total liabilities tripled to an amount exceeding six million dollars. Before the buyout, Lenco reported an equity (book) value of $5.4 million. The Unibanc loan of $5.25 million almost wiped out this equity. Ford added no assets or other equity as part of the buyout. Thus, Lenco went from a substantial business with over five million dollars in equity to a corporation with great debt and practically no equity.7
*425II. DISCUSSION
A district court’s findings of fact are reviewed for clear error. Prince v. Sargent, 960 F.2d 720, 720 (8th Cir.1992) (per curiam). Conclusions 'of law and mixed questions of law and fact are reviewed de novo. Cooper Tire & 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 that “[bjorrow-ing from trust law, ERISA imposes high standards of fiduciary duty upon those responsible for administering an ERISA plan and investing and disposing of its assets.” Under ERISA § 1104(a)(1), “the ERISA fiduciary must act ‘solely in the interest of the participants and beneficiaries’ of the plan, ‘for the exclusive purpose’ of providing 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 selling securities issued by the plan’s employer sponsor because such transactions 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 exemp: tion to the § 406(a) prohibition. Section 408(e) permits employee benefit plans to purchase or sell employer securities only if the sale or purchase of the securities is for adequate consideration. The definition of “adequate consideration” under ERISA imposes a two-fold requirement: (1) the price paid must reflect the fair market value of the asset, and (2) the trustee must conduct a careful and independent investigation of the circümstances 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 concluding that a conflict of interest did not exist and that Mercantile did not have a duty to make an independent investigation of the transactions at issue. A conflict of interest existed both before Lenco’s board decided to sell the corporation and during the sale transaction. The district court noted that both the ESOP beneficiaries and the testamentary trusts beneficiaries wanted the maximum amount per share of Lenco stock. However, a sale of the ESOP stock at the maximum amount per share did not constitute the primary objective of the ESOP beneficiaries. A conflict of interest between the ESOP beneficiaries and the testamentary trusts beneficiaries existed because the ESOP 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 person standard requires that he make a careful and impartial investigation of all investment decisions.” Schaefer v. Arkansas Medical Soc’y, 853 F.2d 1487, 1492 (8th Cir.1988), citing Donovan v. Bierwirth, 680 F.2d 263, 271 (2d Cir.), cert. denied, 459 U.S. 1069, 103 S.Ct. 488, 74 L.Ed.2d 631 (1982). Thus, the ESOP fiduciary is not 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 the utmost care and fairness.
Martin, 965 F.2d at 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 the ESOP, Mercantile had a duty to investigate the proposed transaction and the transferee with care.
The district court erred in concluding that the sale of stock on April 5, 1984 did not constitute the type of “investment” which triggers close investigation mandated by Martin. This court has concluded that “ERISA imposes high standards of fiduciary duty upon those responsible for administering an ERISA plan and investing and disposing of its assets.” Martin, 965 F.2d at 664 (emphasis added). Especially in the context 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, the ESOP plan document contemplated investment only *426in Lenco stock. Accordingly, any removal of that stock from the ESOP trust should trigger high scrutiny by a fiduciary.
When Lenco’s board started to discuss a sale of Lenco, Mercantile should have resigned as trustee of either the ESOP trust or the testamentary trusts. Mercantile failed to recognize that the ESOP beneficiaries had different interests than those of other stockholders. The ESOP beneficiaries as employee stockholders were primarily interested in having an ongoing corporation with a solid financial base. Congress created ESOPs as a statutory pension program designed to promote investment of employee retirement assets in the stock of the employer. In fact, courts have recognized a presumption in favor of finding ESOP fiduciaries acted prudently when they invest only in the stock of the employer. Moench v. Robertson, 62 F.3d 553, 571 (3d Cir.1995), cert. denied, 516 U.S. 1115, 116 S.Ct. 917, 133 L.Ed.2d 847 (1996). In this way, ESOP programs allow a shift in ownership of the nation’s productive assets to workers. This program can serve a dual purpose. High productivity by employees benefits both the employer and the employees themselves as beneficiaries of an ESOP because high productivity ordinarily improves profitability.
The testimony by the Secretary’s expert, Dr. Murray, further demonstrated the conflict between the interests of the testamentary trusts beneficiaries and the ESOP beneficiaries. Dr. Murray testified that a conflict existed due to different time horizons. The ESOP beneficiaries looked for growth and development on a long-term basis while the testamentary trusts beneficiaries wanted current income and a highly liquid 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.
After deciding to sell Lenco, Mercantile committed its second breach of fiduciary duty by failing to investigate whether the details of the sale transaction would advantage the ESOP employee beneficiaries.8 Specifically, Mercantile failed to investigate the financing arrangement and the qualifications of the new owner. Mercantile ignored numerous warning signs that Ford could not afford to have the ESOP included in the sale and that Ford did not have the experience to lead the company.
Mercantile did not investigate at all the propriety of a sale to Ford given the heavy Unibanc financing. Dr. Murray testified that Mercantile as a prudent fiduciary should have reviewed the loan agreement, the history of the transaction with the buyer’s representatives, the borrowing formula, and satisfied itself that Ford had the financial resources to carry through with the transaction. An investigation by Mercantile would have shown no major bank was going to participate in the buy-back. As part of the deal for Ford to buy the ESOP stock on April 5, 1984, a twenty-four-hour loan was guaranteed by a collection of four individuals who called themselves Exchange Financial Services. Ford paid this loan the next day when Mueller bought the same shares back for the ESOP.
Lenco borrowed over five million dollars from Unibanc. In essence over four million dollars of the Unibanc loan went to Ford to help him acquire Lenco. That money did not benefit Lenco, but only Ford personally. Furthermore, the terms of the Unibanc loan demonstrate the difficult financial position Ford imposed upon Lenco. The Unibane loan required a general lien on all of Lenco’s assets, including the company’s real estate, fixed assets and accounts receivable.
Mercantile did not investigate Ford’s background to determine if he could effectively operate Lenco, a multimillion dollar manufacturing business. An investigation would have shown that Ford had no pertinent expe*427rience. According to Ford’s resume, his previous employment included owning and operating a real estate development company, operating a funeral home, and serving as a state legislator. Ford’s personal liquid assets consisted 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 breached 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 the testamentary trusts, which had an interest in the Ford transaction being completed and getting cash for the stock held by the trusts, caused Mercantile to avoid its duty to protect the ESOP from participating in a transaction harmful to the interests of the ESOP. Mercantile obviously desired to get the money for the shares and run from further responsibility, which it did.
Mercantile 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 prudent transaction for adequate consideration. In calculating the fair market value of Lenco, the district court clearly erred by not taking into account the extraordinary debt.9 Moreover, I think the expert testimony at the trial as to the value of the stock is relatively immaterial. The district court should have valued the ESOP stock according to the formula in the ESOP plan document. This formula called for a combination of a price-earnings and a book value method of valuation. With the extraordinary debt, the book value approached zero. The price-earnings based on past performance were not reliable, as Ford, a new person without experience, was taking control of Lenco. The value of the corporation was obviously greatly lessened. A court does not need an expert witness to either demonstrate or refute what is obvious.
Mercantile successfully asserted in the district court that Mueller paid fair market value for the former ESOP stock. That contention and the district court’s confirming conclusion flies in the face of reality. The real issue is whether Mercantile or any prudent trustee would consider the stock to have the equivalent value on April 6,1984 as it did on April 5, 1984. On April 5, 1984, the corporation was a successful business with good leadership and little debt, but the next day, the corporation had untested leadership and heavy debt. Notwithstanding that the ESOP almost doubled its interest in the company, the company’s value was far less and the ESOP lacked control of the company. I suggest a trust company or investment advis- or making this sort of business decision would be short-lived. Interestingly, prior to the sale of the stock, Mercantile rejected Ford’s overtures that Mercantile 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 Mercantile did not breach its fiduciary duties of loyalty and prudence when it failed to appoint a new independent trustee or to investigate the proposed sale of ESOP stock to Ford. Moreover, as a matter of undisputed fact, the buy-back amounted to an imprudent investment by trustee Mueller.
Although the majority absolves Mercantile from liability, the relation in this dissent of the facts and law may serve some beneficial purpose. The courts, I believe, should take a hard look at those individuals or corporations who manipulate ESOP shares for the advantage of people other than the employee beneficiaries. Fiduciaries should carefully safeguard the interests of the ESOP benefi*428ciaries in ESOP plans. I would remand this case to determine an appropriate amount of damages to be paid by Mercantile for its breaches of fiduciary duty.
. Legend related to the "Three Wise Monkeys” carved over door of Sacred Stable, Nikko, Japan, in Bartlett's Familiar Quotations 919 (Emily Morison Beck ed., 15th ed.1980).
. The Unibanc loan was secured by a general lien on all of Lenco's assets, including the company's real estate, fixed assets and accounts receivable. Marine Midland Bank later purchased the asset-based lending division from Unibanc. Marine Midland Bank placed even further restrictions on Mercantile’s use of assets and cash.
. Ford received $19.32/share for his stock, for a total of $4,076,510. This redemption and the sale back to the ESOP allowed Ford to purchase Lenco with little personal debt. Ford’s remaining Lenco shares gave him control of the 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 the complete mortgaging of Lenco’s assets. But in any event, the book *425value had been greatly reduced as Lenco became saddled with heavy debt.
. The district court incorrectly stated that the Secretary wanted to hold Mercantile liable because the scheme left Lenco highly leveraged which ultimately lead to its bankruptcy. The argument made by the Secretary did not focus upon the eventual bankruptcy of Lenco in 1989. Rather, the Secretary presented the argument that Mercantile should be held liable for a transaction that was not in the best interests of the beneficiaries in 1984.
. In addition, in a bankruptcy action, the parties stipulated that the ESOP purchase of the stock was for more than adequate consideration and would subject Lenco to liability. In re Lenco, Inc., 116 B.R. 141, 143 (Bankr.E.D.Mo.1990).