Pension Plan Accused of Questionable Investments

The plan is the largest private-sector, multi-employer pension plan in Canada with 240,000 participants, most of whom are members of the United Food and Commercial Workers union, according to the Toronto Star. Union member Paul Whiteway expressed concerns that initiated a two-year investigation by the Financial Services Commission of Ontario.

According to the Toronto Star, the Financial Services Commission of Ontario issued an 82-page report accusing the plan of breaches of the Pension Benefits Act, including failing to act in a prudent manner when making investment decisions, e xceeding regulatory limits in several cases of real estate investments, failing to report potential conflicts of interest, and failing to produce requested documentation. Under the Pension Benefits Act the plan could face charges and fines of up to $100,000 per incident, the newspaper reported.

The newspaper itself investigated the plan and found many investment ties with Ronald Kelly, an ex-priest who pleaded guilty to 10 counts of indecent assault on 5 boys in 1979. The newspaper reported that fund records and other regulatory filings show the plan invested more than $235 million with companies where Kelly had an interest from 1995 to 2002. The records indicate the plan invested at least $142 million in the Caribbean ventures with Kelly over a four-year period. The plan also invested in other risky businesses that Kelly had ties to, including a now-bankrupt potato processing plant in Idaho and a shrimp factory in Newfoundland, which sank in 2001, the newspaper said. The company cut ties with Kelly, but continued to invest in the Caribbean ventures.

The plan also invested at least another $110 million in loans, mortgages and equity into other risky businesses, according to the regulator’s report and the Star’s investigation.

The commission’s probe focused on the pension plan’s investment committee, which at one time oversaw decisions affecting about 45% or $446.8 million of the fund’s assets. T he commission said the plan’s board of trustees does not appear to have taken any steps to ensure the fund’s key investment committee had the necessary expertise to decide many ventures, according to the newspaper. Since 2001 the board has dropped the responsibility of the committee to less than 30% of the plans assets.

The newspaper said that in 2004 the plan notified participants thatlow interest rates and difficult investment markets had contributed to a lower growth rate of pension assets meaning benefits for future retirees would drop 20% effective January 1, 2005.

The commission has directed the plan’s board to fix the fund’s decisionmaking processes, comply with investment restrictions, improve monitoring, and conduct a complete, independent due diligence review of the Caribbean ventures, the newspaper said. If the plan does not comply, the commission could take over operation of the plan.

Bernard Christophe, the plan’s chairman, insisted the fund is “sound” and has demanded that the commission withdraw the report, saying it is “incomplete and factually inaccurate”.