Compliance March 6, 2004

Judge Oks Capital Consultants Deal

June 27, 2002 (PLANSPONSOR.com) - The legal battle to recover the millions of dollars lost by mostly union pension and benefit funds through alleged fraud by Capital Consultants, has wrapped up with the approval of a $142.5 million settlement by a federal judge.

Reported by

Fred Schneyer

Investors lost an estimated $500 million through risky Capital Consultants investments, officials said. The firm was seized by federal regulators in September 2000 and has since been under receivership.

The settlement, involving 184 plaintiffs and 68 defendants, was hammered out earlier this year (see Union Funds to Recoup Investment Losses ).

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Part of the settlement involved five law firms, which also agreed to pay damages (see Law Firms Settle Capital Consultants Charge s ).

Lawsuit Flood

The demise of Capital Consultants sparked a large number of lawsuits by more than 65 trusts throughout the country, representing 500,000 plan participants seeking to recoup some of their investment losses. The lawsuits sought compensation from a wide variety of firms and individuals who did business with Capital Consultants, including borrowers, law firms, accounting firms and others.

The 22 lawsuits eventually were consolidated and mediation began last summer by US Circuit Judge Edward Leavy of the US Court of Appeals for the Ninth Circuit.

While approval of the consolidated settlement appeared to wrap up most of investors’ claims, it is still unclear if the US Department of Labor (DoL) and the Securities Exchange Commission will continue to pursue their claims of regulatory violations.

Also, to date, three people have pleaded guilty to criminal charges associated with investment fraud. Investigations by the US attorney’s office are continuing and more people may eventually be indicted on criminal charges.

The case is Consolidated Capital Consultants Litig., SEC v. Capital Consultants, D. Or., No. 00-1290, settlement approved 6/19/02.