According to the DoL news release, although John Orecchio has submitted proof of current inability to make restitution, the consent judgment requires him to submit annual financial statements to the Labor Department and to pay off the judgment as funds are received by him. The judgment also bars Orecchio from serving in a fiduciary or service provider capacity to any employee benefit plan governed by the Employee Retirement Income Security Act (ERISA).
The DoL filed a lawsuit on April 10, 2008 against AA Capital Partners, its co-owner and president Orecchio, chief financial officer Mary Elizabeth Stevens, and affiliate AA Capital Liquidity Management, LLC for allegedly misusing plan assets and charging the plans excessive fees on investments (see DoL Sues Investment Firm on Behalf of MI Union Plans ). The suit claims that at various times from 2002 to 2006, the defendants 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 owned by Orecchio. In addition, they caused the plans to pay unauthorized fees to AA Capital.
In July 2008, the Department filed an amended complaint adding an additional count which alleged that plan assets were imprudently invested in a limited partnership created to invest in Xyience Inc., a Nevada corporation which manufactures and sells food, vitamins and beverages, even though a prudent investigation had not been conducted with respect to this investment strategy, the news release said. The DoL also at that time introduced evidence of a kickback scheme involving a Michigan pension fund’s investment in a Mississippi casino (see Feds Allege Pension Fund Kickback Scheme Involving Casino Holding ).
The pension plans that suffered losses as a result of Orecchio’s actions covered more than 60,000 participants of the Carpenters Pension Trust Fund of Detroit and Vicinity, Operating Engineers Local No. 324 Pension Fund, Michigan Regional Council of Carpenters Annuity Fund, Millwrights’ Local No. 1102 Supplemental Pension Fund, and Michigan Teamsters Joint Council #43 Pension Fund. As of April 30, 2006, the pension plans had total assets of approximately $3.1 billion.
In 2006, the Securities and Exchange Commission filed a complaint against AA Capital Partners Inc. and Orecchio, accusing him of misspending $10.7 million of investments by Detroit area pension funds, on things such as political donations and sporting events (see SEC Accuses Investment Manager of Misusing Pension Funds ).
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