According to the Wall Street Journal, the DoL charged in papers filed in US District Court in Washington, DC, that Union Labor Life and subsidiary Trust Fund Advisors (TFA) put money from two Laborers International Union defined benefit plans into a 120-acre tract of land in North Las Vegas, with the intention of developing the property into individual lots.
Union Labor Life and TFA didn’t get the land appraised, paid too much for the property, and didn’t properly investigate the investment’s risks, according to the DoL. The Union Life companies abandoned the project in 1997 and later sold the land at a loss for about $9.3 million, the DoL charges.
The DoL wants Union Labor Life and TFA to make up the loss from the deal with interest.
Money for the real-estate project came from two defined benefit plans with total assets of more than $1.2 billion as of 1999. Together, the two plans covered about 37,000 people, according to the Journal.
Stock Trading Under Scrutiny
The suit comes amid a federal grand jury investigation into the trading of Ullico stock by union officials who sat on the company’s board.
Ullico, which makes direct investments on its own behalf besides managing unions’ pension funds, was an early investor in Global Crossing Ltd., an international telecommunications company that is seeking federal bankruptcy protection. Global Crossing is also under scrutiny for its accounting practices.
Ullico’s stock price rose and fell in past years often hand-in-hand with Global Crossing share prices. Investigators are asking whether Ullico board members wrote repurchase and sales rules that allowed them to benefit from these fluctuations without providing the same opportunity to other shareholders, the Journal reported
Meanwhile, the AFL-CIO has been conducting its own inquiry into the purchase and sales of Ullico stock by board members.
The labor federation, an investor in Ullico, is looking into whether any board members benefited improperly from the sale of Ullico stock back to the company under rules that they wrote for themselves.