DoL Sues Ohio Union over Capital Consultants Investments

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. 

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.