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Release Date: August 17, 2007
Release Number: 07-1004-SAN
Contact Name: Gloria Della
Phone Number: 202.693.8664/202.693.4676
Order resolves U.S. Labor Department lawsuit filed to
protect union workers
San Francisco – A consent order resolving a
U.S. Department of Labor lawsuit places control of five employee benefit
plans sponsored by Local 38 of the United Association of Plumbers,
Pipefitters and Journeymen of San Francisco with independent,
court-appointed fiduciaries, replacing all but two of the plans’
trustees, and permanently barring them and the former plan administrator
from serving as fiduciaries or service providers to any such plans. It
also requires payment of $3.5 million to the union’s pension plan from
the defendants’ fiduciary liability insurer and additional money may
be paid from the expected sale of the Konocti Harbor Resort and Spa on
Clear Lake in Kelseyville, California. The order resolves a department
suit against the defendants for allegedly diverting plan assets to
renovate and operate Konocti Harbor.
“Workers’ retirement dreams, health and other
benefits were jeopardized by the gross mismanagement of their benefit
plans,” said Secretary of Labor Elaine L. Chao. “This legal action
puts the benefit plans under new, independent management and restores at
least $3.5 million to the pension plan.”
The department’s 2004 suit alleged violations of
the Employee Retirement Income Security Act (ERISA) by current and
former trustees Lawrence J. Mazzola Sr. (the business manager and
financial secretary-treasurer of Local 38), Lawrence Mazzola Jr.,
William B. Fazande, Larry Lee, James R. Shugrue, Vohon J. Kazarian, Tom
Irvine, Robert E. Buckley, Robert Buckley Jr., Art Rud, Ron Fahy and
Robert Nurisso; former plan administrator Frank Sullivan; and Local 38.
Filed in federal district court in San Francisco, the suit alleged that
the defendants maintained inadequate financial controls, violated plan
documents, engaged in self-dealing, and imprudently spent millions to
build and maintain facilities at Konocti despite the resort’s
continuing financial losses. Local 38 also allegedly profited from the
interest on a $6 million loan.
Under the settlement, a court-appointed independent
administrator will oversee the plans and implement financial controls to
prevent future misuse of the plans’ assets. A second court-appointed
fiduciary will have independent and exclusive authority over the
property sale and, until it is sold, management and operation of the
resort. The current and former trustees no longer have any control over
Konocti. In addition, the order requires all pension plan assets to be
managed by professional investment managers and overseen by an
investment monitor. Mazzola Jr. and Buckley Jr., who had been trustees
for fewer years, are permitted to remain as trustees provided they
attend training on ERISA fiduciary responsibilities.
The retirement, health, scholarship, apprenticeship,
and vacation and holiday funds cover more than 2,000 participants
employed throughout northern California.
This case was investigated by the San Francisco
Regional Office of the Labor Department’s Employee Benefits Security
Administration (EBSA). Employers and workers can contact that office at
415.625.2400 or toll-free at 1.866.444.EBSA (3272) for help with
problems relating to private sector pension and health plans.
Chao v. Mazzola;
Civil Action Number C-044949
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