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EBSA News Release: [02/11/2004]
Contact Name: Gloria
Della
Phone Number: (202) 693-8664
Labor Department Sues Trustees of Union Health Plans
over Investments with Oregon Investment Manager CCL
WASHINGTON—The U.S. Department of Labor has sued the
trustees of two union-sponsored health plans in Colorado for imprudently
investing plan assets in investments with Capital Consultants LLC (CCL). The
department contends the investments caused the plans to suffer substantial
losses that jeopardized the benefits of more than 2,700 workers.
“This is an example of this Administration’s commitment to
ensure that American workers receive all the benefits that they are
promised,” said U.S. Labor Secretary Elaine L. Chao. The Labor
Department’s legal actions in the Capital Consultants cases will help
thousands of workers by restoring their lost assets and improving plan
oversight in the future.”
The department’s lawsuits allege that the current and former
trustees of the Operating Engineers Health and Welfare Trust Fund of Denver
Co., (Chao v. Brown) and the Sheet Metal Workers Local No. 9 Health and
Welfare Fund of Denver, Co., (Chao v.
Keating violated the Employee Retirement Income Security Act (ERISA) by
imprudently authorizing the investment of plan assets in a series of risky
private placement investments managed by CCL, including loans to Wilshire
Credit Corporation.
Between 1996 and 2000, the plans invested more than $1.5 million with
CCL. The suits allege the trustees authorized these investments without
conducting an adequate investigation of the merits of the investments. The
trustees of the Operating Engineers plan also allegedly failed to enforce the
plan’s investment policy.
The department is seeking court orders to require that the defendants
restore any losses to the funds and institute new plan procedures and controls
relating to investments. The suits were filed in federal district court in
Denver, Co. The cases resulted from investigations conducted by the
department’s Employee Benefits Security Administration’s Kansas City
regional office. The department has previously sued the trustees of union plans
in Oregon, Ohio and Minnesota for similar imprudent investments in CCL.
CCL was a registered investment manager that provided investment
services to more than 60 primarily union-sponsored pension, health and welfare
plans 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. As a result of the department’s actions, the court
appointed a receiver who has collected more than $140 million, in addition to
more than $130 million obtained through private litigation.
In 2002, Jeffrey Grayson and his son Barclay Grayson, CCL’s chief
executive officer and president respectively, were indicted on criminal charges
related to the improper investments. The son served a prison sentence.
(Chao v. Brown) Civil Action No. 04-D-227 (OES)
(Chao v. Keating) Civil Action No. 04-D-228 (OES)
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