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Compliance May 12, 2008
DoL Obtains Payment from Union for Risky Investments
May 12, 2008 (PLANSPONSOR.com) - The U.S. Department
of Labor (DoL) announced it has obtained consent orders
requiring trustees of the Cleveland-based Sheet Metal Workers
Local 33 Pension Plan to restore $625,000 to the plan for
risky investments authorized by the trustees with Capital
Consultants LLC of Portland, Oregon.
Reported by Rebecca Moore
Under the orders, the trustees must also pay a $125,000 civil penalty and institute controls and reforms over future investments made by the plan, according to the announcement. The DoL claims that between 1998 and 2000, the trustees allowed plan assets to be used by Capital Consultants to make loans, even though the loans violated the plan’s investment guidelines, and also allegedly allowed the plan to invest more than 10% of its total assets under management with Capital Consultants with a single borrower – Wilshire Credit Corp. – in violation of the plan’s investment agreement with Capital Consultants.
The announcement said the money recovered under the DoL’s consent orders is in addition to the money the plan recovered through the Capital Consultants court-appointed receiver.
The DoL filed the suit in 2005 alleging that trustees Alan Chermak, Ken Castro, Donald Skala Jr., Richard Rohaley, and Robert Finley violated the Employee Retirement Income Security Act (ERISA) by allowing imprudent and risky investment of plan assets (See DoL Sues Ohio Union over Capital Consultants Investments ).
Since 2002, the department has obtained permanent bars against 32 trustees of 34 union plans in Arizona, California, Colorado, Idaho, Minnesota, Nevada, Ohio, Oregon, and Utah for authorizing imprudent investments through Capital Consultants.(See DoL Settles With Union Plan Trustees over Imprudent CCL Investments ).