|
|
|
Release Date: 08/29/2003
Release Number: 03-463
Contact Name: Gloria Della
Phone Number: 202.693.8664
|
Printer Friendly
Version
|
|
|
|
Washington, DC - The U.S. Department of Labor
today sued the trustees of seven union-sponsored pension and health plans
in Ohio and Minnesota for imprudently investing plan assets in risky
private placement investments with Capital Consultants LLC. As a result of
the investments, the plans suffered substantial losses that jeopardized
the benefits of over 19,000 workers. |
“The
trustees’ actions are abominable. Hardworking men and women trusted
these trustees to protect and preserve their union-sponsored pension and
health benefits. The trustees abused that trust and thousands of workers
saw their retirement security put in jeopardy. The Administration is suing
on behalf of these workers to recover as much as possible for the plans
and to establish new procedures and controls to ensure that workers’
pension and health plans will not be raided again,” says Secretary of
Labor Elaine L. Chao. |
Capital
Consultants, LLC (CCL) was a registered investment manager that provided
investment services to more than 60 primarily union-sponsored pension,
health and welfare plan clients governed by federal employee benefits law.
In 2000, the department and the Securities and Exchange Commission (SEC)
sued CCL and its principals for investing plan assets in a series of
imprudent loans, self-dealing and charging excessive fees. In April 2002,
the department sued trustees of 10 union plans – mostly on the west
coast - for similar violations. As a result of the department’s actions,
the court appointed a receiver who has collected more than $140 million in
addition to $110 million obtained through private litigation. |
In
2001, Jeffrey Grayson and his son Barclay Grayson, CCL’s chief executive
officer and president respectively, were criminally charged with regard to
the improper investments. The son currently is serving a prison sentence. |
|
The Labor Department today filed five separate lawsuits
alleging that the trustees violated the Employee Retirement Income
Security Act (ERISA) by imprudently authorizing plan assets to be invested
in a series of risky private placement investments managed by CCL,
including loans to Wilshire Credit Corporation. The seven plans covered
over 19,000 participants and had approximately $793 million in assets as
of April 30, 2000. |
Between
1995 and 2000, the trustees allegedly authorized increasing investments of
plan assets in private placement investments. Trustees of five plans
maintained the private investments with CCL despite warnings by the
plans’ investment advisors about the illiquid nature, unacceptable
collateral and risks associated with the investments. For two of the
plans, the trustees failed to adequately monitor or to retain experts
qualified to monitor investments made in the private investments by CCL. |
In
addition, trustees Dennis P. Talbott, Greg Shafranski and Jerry Westerholm
are charged with self-dealing for accepting substantial gratuities from
CCL for payment of trips, services and other gratuities. |
Named
as defendants are current and former trustees of the: Tri-County Building
Trades Health Fund of Austintown, Ohio in Chao v. Talbott; International
Brotherhood of Electrical Workers Local 212 Pension Trust Fund of
Cincinnati in Chao v. Bolling; Electrical Workers Local No. 292 Annuity
and Pension Plans of St. Louis Park, Minnesota in Chao v. Shafranski;
Sheet Metal Workers Local Pension Fund in Akron in Chao v. Derreberry; and
the International Brotherhood of Electrical Workers Local 38 Pension and
Health and Welfare Funds of Valley View, Ohio in Chao v. Chilia. In
addition, the suit charges Monitor Advisory Services, Inc. and its owner
Louis C. Gerber as the investment monitors to the IBEW local 212 fund. |
|
The department is seeking court orders to require that
defendants restore to the plans any losses and illegal gratuities received
by them and to institute new plan procedures and controls relating to plan
investments. The suits involving the Tri-County, Sheet Metal Workers and
Electrical Workers 292 plans also ask the court to permanently bar
defendant trustees Talbott, Shafranski and Westerholm from serving as plan
fiduciaries. |
The
suits were filed in federal district court in Cleveland, Cincinnati and
Minneapolis. The cases resulted from investigations conducted by the
Cincinnati and Kansas City regional offices of the department’s Employee
Benefits Security Administration. |
|
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 202.693.7755. |
