A DoL news release said the investment firm is accused of improperly causing more than $25 million in losses for five Michigan union pension funds by misusing plan assets to benefit themselves and by charging the plans excessive investment management fees. The suit alleges that AA Capital Partners, its co-owner and president John Orecchio, chief financial officer Mary Elizabeth Stevens, and affiliate AA Capital Liquidity Management LLC violated the Employee Retirement Income Security Act (ERISA) by imprudently misusing plan assets and charging the plans excessive fees on investments.
According to the news release, at various times from 2002 to 2006, the defendants are alleged to have improperly used $25.9 million of the plans’ assets to pay for, among other things, the operating expenses of the firm, renovations to a horse farm and a strip club managed by Orecchio. In addition, the DoL alleges the defendants caused the plans to pay unauthorized fees to AA Capital Partners.
The suit seeks a court order to require that the defendants restore to the plans all losses, return illegal profits, and correct transactions prohibited by law, and also asks that the defendants be permanently barred from serving in the future as fiduciaries to any plan governed by ERISA.
The pension plans cover more than 60,000 participants of the Carpenters Pension Trust Fund of Detroit and Vicinity, Operating Engineers Local Number 324 Pension Fund, Michigan Regional Council of Carpenters Annuity Fund, Millwrights’ Local Number 1102 Supplemental Pension Fund, and Michigan Teamsters Joint Council #43 Pension Fund.
“This case involves gross abuse of the trust that workers and their families placed in the management of these pension funds,” said Secretary of Labor Elaine L. Chao, in the news release.
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