Investment Firm Ordered to Restore $1M to Union Pension Fund

A DoL news release said the money is restitution for improperly investing $25 million in risky private placement bonds. The firm also was ordered to pay $109,990.91 in fines to the federal government.

According to the DoL, C.S. Capital Management, formerly known as Chadwick, Saylor & Co., is an investment firm hired by the plan to evaluate and make a recommendation on the purchase of bonds that financed the Playa Vista development project in Los Angeles. 

A Labor Department lawsuit, filed simultaneously with the order in the U.S. District Court for the Northern District of Virginia, alleges that Saylor and the firm violated the Employee Retirement Income Security Act by making the decision to purchase Playa Vista B bonds for the plan and purchasing the bonds on November 9, 1998.  According to the suit, the bond issuer paid one interest payment to the plan in 2001 and has not made any interest or principal payments since. 

The suit also alleges the defendants acted imprudently by purchasing bonds with an unduly low rate of return compared to the risk assumed by the plan and by purchasing bonds that subordinated the plan’s investment to that of Playa Vista A bondholders.  As a result, it was less likely that the plan would recover its investment and interest.

The plan covers more than 123,000 participants nationwide.