>According to the DoL, imprudent investments made by the plan trustees resulted in significant losses to the plans, endangering the benefits of more than 2,700 workers covered in the two plans.
>The lawsuits, filed in federal district court in Denver, Colorado against the current and former trustees of the Operating Engineers Health and Welfare Trust Fund of Denver, Colorado, (Chao v. Brown) and the Sheet Metal Workers Local No. 9 Health and Welfare Fund of Denver, Co., (Chao v. Keating), allege that the plan trustees imprudently invested plan assets in multiple risky private placement investments with Oregon firm Capital Consultants LLC (CCL), a press release said.
>The lawsuits stem from the department’s Employee Benefits Security Administration’s (EBSA) investigations and aim to get court orders in place to require that the defendants restore any losses to the funds and institute new plan procedures and controls relating to investments
>The DoL claims that during 1996 to 2000, the union plans invested over $1.5 million with CCL, and did not properly investigate the firm or the investments before authorizing the transactions. Additionally, the DoL says that the Operating Engineers’ trustees also acted against the plan’s investment policy.
>Between 1996 and 2000, the plans invested more than $1.5 million with CCL. The suits allege the trustees authorized these investments without conducting an adequate investigation of the merits of the investments. The trustees of the Operating Engineers plan also allegedly failed to enforce the plan’s investment policy, the release stated.
>CCL was previously sued in 2000 by the US Securities and Exchange Commission (SEC) for investing plan assets in a series of imprudent loans, self-dealing and charging excessive fees and, according to the release, as a result, the court appointed a receiver who has collected more than $140 million, in addition to more than $130 million obtained through private litigation.
>Additionally, in 2002, CCL’s chief executive officer Jeffrey Grayson and president Barclay Grayson were indicted on criminal charges related to the improper investments.