DoL officials, who made the allegations in a series of federal court lawsuits filed in US District Court in Portland, also charge that several of the trustees were improperly influenced by gifts from Capital Consultants founder Portland financier Jeffrey Grayson.
Capital Consultants, an investment manager specializing in union pension and benefit funds, lost $365 million – mostly in union fund assets, according to officials. Securities and Exchange Commission officials said it was the largest investment manager fraud in US history.
Basic Investing Rules
In the lawsuits, the DoL alleged that the union trustees violated basic investing rules – ignoring warnings that Capital Consultants was putting all of the plan’s assets into high-risk loans.
The government lawsuits request a court order barring some of the trustees from running pension and benefit plans and requiring that the plans implement new fiscal controls.
The lawsuits name 44 trustees from three Portland-area labor organizations:
- The Oregon Laborers,
- Local 290 of the Plumbers Steamfitters and Shipfitters Union, and
- Local 11 of the Office Employees International Union
They also named 42 trustees of Idaho Laborers and 8th District Electrical trust funds affiliated with the International Brotherhood of Electric Workers in Colorado and Utah.
Gary Kirkland, chief executive of the Portland office employees union and one of Portland’s most powerful labor leaders, is portrayed as a key player in the Capital Consultants scandal.
The DoL suits noted that Kirland’s son Dean earned about $1 million a year as Capital Consultants’ chief salesman to union clients. The suits also alleged that Kirland pressured other trustees to allow Capital’s risky loans and to ignore input from union investment advisors that Capital investments were underperforming.
Gary and Dean Kirkland are also alleged to have taken many trips including hunting antelope in South Africa and red stag in Patagonia. According to the DoL charges, Capital Consultants paid for both trips, as well as numerous others.
Dean Kirkland said neither he, his father, nor any other trustees who took trips did anything wrong.
Capital Consultants’ Grayson agreed in February to cooperate with federal prosecutors in an ongoing criminal investigation into his company’s collapse.