>The US Department of Labor (DoL) filed five separate lawsuits alleging that the trustees violated ERISA by authorizing the CCL investments including loans to Wilshire Credit Corporation. The seven plans covered over 19,000 participants and had approximately $793 million in assets as of April 30, 2000.
>According to the lawsuit, the trustees allegedly authorized increasing investments of plan assets in private placement deals between 1995 and 2000. Trustees of five plans maintained the CCL transactions despite warnings by the plans’ investment advisors about the illiquid nature, unacceptable collateral and risks associated with the investments. For two of the plans, the trustees failed to adequately monitor or to retain experts qualified to monitor investments made in the private investments by CCL, the DoL charged.
>In addition, trustees Dennis Talbott, Greg Shafranski and Jerry Westerholm are charged with self-dealing for accepting substantial gratuities from CCL for payment of trips, services and other gratuities.
>Capital Consultants, LLC (CCL) was a registered investment manager for more than 60 primarily union-sponsored pension, health and welfare plan clients. 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.
>In 2000, the DoL and the US Securities and Exchange Commission (SEC) sued CCL and its principals for investing plan assets in a series of imprudent loans, self-dealing and charging excessive fees. In April 2002, the DoL sued trustees of 10 union plans – mostly on the west coast – for similar violations (See DoL Targets Portland Union Fund Trustees ). As a result of the DoL’s actions, the court appointed a receiver who has collected more than $140 million in addition to $110 million obtained through private litigation (See Judge Oks $300 Million Capital Consultants Settlement ).
>Named as defendants in the latest cases are current and former trustees of the:
- Tri-County Building Trades Health Fund of Austintown, Ohio
- International Brotherhood of Electrical Workers Local 212 Pension Trust Fund of Cincinnati
- Electrical Workers Local No. 292 Annuity and Pension Plans of St. Louis Park, Minnesota
- Sheet Metal Workers Local Pension Fund in Akron
- International Brotherhood of Electrical Workers Local 38 Pension and Health and Welfare Funds of Valley View, Ohio.
>In addition, the suit charges Monitor Advisory Services, Inc. and its owner Louis Gerber as the investment monitors to the IBEW local 212 fund.
>The DoL has asked for court orders to require that defendants restore to the plans any losses and illegal gratuities received by them and to institute new plan procedures and controls relating to plan investments. The suits were filed in federal district court in Cleveland, Cincinnati and Minneapolis.
In 2001, Jeffrey Grayson and his son Barclay Grayson, CCL’s chief executive officer and president respectively, were criminally charged with regard to the improper investments. The son currently is serving a prison sentence.