Ontario Regulators Charge Pension Fund Lacks Supporting Investment Material

February 15, 2006 (PLANSPONSOR.com) - Ontario's financial services regulator has blasted a major Canadian union pension plan for not turning over supporting documents for almost $167 million in Caribbean ventures despite three years of government requests for the information.

The Ontario Financial Services Commission (FSCO) said the fact that the Canadian Commercial Workers Industry Pension Plan has still not produced documents to support huge investment decisions in the money-losing properties indicates there are no documents to be had, the Toronto Star reported. The pension plan provides benefits to 290,000 current and former members of the United Food and Commercial Workers union and is the biggest private-sector, multi-employer plan in the country with assets of about $1.4 billion.

The commission has repeatedly asked the plan for documents relating to investment decisions by the special committee of trustees into four Bahamian and Jamaican properties. The requests are for independent appraisals, loan agreements, financial statements of borrowing companies, searches for claims on their assets and other information supporting the business case for investments, according to the Star report.

The plan pumped almost $167 million into the Caribbean ventures from 1997 to the end of 2003 and has spent millions of dollars more there since then.

“FSCO continues to be of the opinion that no documentation demonstrating that the board of trustees had taken adequate steps to complete a proper due diligence review in respect of the Caribbean development prior to undertaking the investment exists,” the commission said in a follow-up review to a stinging report of the fund’s practices.

Pension Benefits Act Violations

In a report last year, the commission concluded the plan violated the provincial Pension Benefits Act by not conducting due diligence or homework on numerous real estate investments. Investigators found sloppy bookkeeping, poor supervision of assets, breaches of administrative rules and a disregard for the plan’s own policies and procedures.

For its part, the pension plan said it has submitted documentation showing investment committee minutes, due diligence reports and business plans concerning the Caribbean properties since 2001.   The pension plan added that despite the “abundance of information,” the regulator continues to make allegations that trustees failed to take adequate steps to meet fiduciary obligations.

In the follow-up report, or addendum, the commission countered that the fund has provided considerable information on “workout plans” for the properties but not the necessary reviews when it made the investments during the 1990s.

Also, the pension plan is trying to find out who told regulators about possible improprieties by the fund’s trustees, according to a separate Star report. The FSCO said some of the allegations had merit after producing a report that showed serious violations of the Pension Benefits Act.