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Release Date: Wed., May 5, 1999
Release
Number: III-99-05-034-MD
Contact Name: GLORIA DELLA
Phone
Number: (202) 219-8921 |
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The U. S. Department of Labor has sued trustees of the National
Electrical Benefit Fund in Rockville, Md., for making an imprudent loan of over
$6 million in pension assets and for an imprudent purchase of shares in a
limited partnership in 1992 and 1993. |
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The fund is a collectively bargained defined benefit pension plan
funded through contributions of participating employers. Over 390,000
participants are covered by the pension fund, which had approximately $6
billion in assets as of Dec. 31, 1996. |
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Named as defendants are former trustee Jack F. Moore and trustee
John M. Grau. Moore also served as Executive Secretary of the International
Brotherhood of Electrical Workers from 1985 to March 1997. Grau has been
Executive Vice President and Chief Executive Officer of the National Electrical
Contractors Association since 1985. |
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The Labor Department lawsuit alleges that the trustees imprudently
loaned plan assets to Columbia Land and Development Corporation (Columbia) to
acquire and develop land in Orlando, Fla., known as Country Run. The land was
to be developed into approximately 545 single-family lots for sale to home
builders. The department charges that the trustees should have known that the
loan could not be repaid in full with interest. |
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American Capitol Management Co. (ACMC), a partner with the fund in
a separate investment known as the American Capitol Group I Assets Limited
Partnership, guaranteed payment of the Country Run loan. Terence R. McAuliffe
and his wife, Dorothy S. McAuliffe, are owners of Columbia and ACMC. |
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According to the lawsuit, the trustees also imprudently made two
purchases of ACMC’s interest in the limited partnership totaling $2.45
million, thereby reducing the value of ACMC’s guarantee on the Country Run
loan. ACMC’s interest in the limited partnership declined after these
investments from 50% to 11.9%. Furthermore, the trustees allegedly made one of
the purchases of ACMC’s limited partnership interest even though the
Country Run loan was in default. The loan had been in default continuously from
December 1992 to October 1997. |
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The fund subsequently sold its share of the partnership and the
Country Run note to ACMC at a loss. |
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The lawsuit seeks a court order requiring the trustees to
reimburse the fund for any losses, including interest. |
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The lawsuit, filed on May 5, 1999, in federal district court in
Maryland, resulted from an investigation conducted by the Washington District
Office of the Philadelphia Regional Office of the Pension and Welfare Benefits
Administration into alleged violations of the Employee Retirement Income
Security Act. |
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(Herman v. Moore)
Civil Action No. AW99-1283 |
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U.S. Department of
Labor news releases are accessible on the Internet. The information in this
news release will be made available in alternate format upon request (large
print, Braille, audio tape or disc) from the Central Office for Assistive
Services and Technology. Please specify which news release when placing your
request. Call 202.693.7773 or TTY 202.693.7775. |
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