Compliance August 18, 2005

DoL Sues Ohio Union over Capital Consultants Investments

August 18, 2005 (PLANSPONSOR.com) - The US Department of Labor (DoL) has filed suit against the trustees of the Cleveland-based Sheet Metal Workers Local 33 pension plan for imprudently investing in risky private investments with Capital Consultants LLC (CCL) of Portland, Oregon.
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The lawsuit alleged 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.  The plan covered 1,376 participants and had $95,871,140 in assets as of April 30, 2003.

The suit charged that between 1998 and 2000, the trustees allowed $5,750,261 of the plan’s assets to be used by CCL to make loans, even though the loans violated the plan’s investment guidelines.  The trustees also allegedly allowed the plan to invest more than 10% of its total assets under management with CCL with a single borrower – Wilshire Credit Corporation – which ran afoul of the plan’s investment agreement with CCL. 

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Officials say they are seeking restoration to the plans of any losses and requirement for the defendants to institute new procedures and controls relating to plan investments. 

Capital Consultants was an investment manager that provided investment services to more than 60 clients, including union-sponsored pension and health plans.  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 ).

Through the efforts of the Labor Department, its court-appointed receiver, and private settlements, more than $290 million has been recovered for clients that invested with Capital Consultants, the DoL news release said.

Benefits August 17, 2005

DoL Slaps CA Health Worker Firms with FLSA Suit

August 17, 2005 (PLANSPONSOR.com) - Federal officials have filed suit against two California-based health care agencies, alleging that they didn't pay proper overtime wages for 31 employees and violated the overtime provisions of the Fair Labor Standards Act (FLSA).
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An HR.BLR.com news report said the US Department of Labor (DoL) suit filed in the US District Court for the Eastern District of California is seeking a total of $3.1 million in unpaid wages, damages, and interest.

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The DoL suit against Jasmine Hall Care Homes Inc. and Hall Care Homes Inc. and George and Estela Hall, who operated the care facilities, seeks $1.57 million in back wages for work performed between June 1, 2002 and June 1, 2005, and damages and interest, for a total of $3,151,089.

The workers provided around-the-clock care to adults with severe mental disabilities at six Sacramento-area facilities managed by the two defendant companies. The suit alleges that workers typically lived in the care homes with the patients at least five days per week, working 24 hours a day and approximately 120 hours a work week.

Although the workers were salaried, they were not exempt from federal minimum wage and overtime laws, according to the DoL. Federal investigators say that when they computed total salary for all hours worked, employee pay dropped to somewhere between $2 and $4 per hour, well below the federal minimum wage of $5.15 an hour.

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