The Oregon Laborers Union, the Idaho Laborers Union, and the Portland-based Local 11 of the Office and Professional Employees International Union lost an estimated $100 million from risky investments by Capital Consultants LLC, according to a Department of Labor (DoL) estimate.
According to a complaint filed with the Securities and Exchange Commission, Capital Consultants is alleged to have, among other things, run a Ponzi scheme using cleint funds to make interest payments to clients invested in a failed and bankrupt loan that Capital Consultants made to Wilshire Credit Corp.
The three unions’ settlement, plus lawsuits by two other union local clients of Capital Consultants, are scheduled to generate a total of $16 million in recoveries. Settlement dollars will come from the trustees’ fiduciary liability insurance policies.
Feinberg said the settlements involving his clients call for:
- a payment of $4 million to the trust funds administered by the Oregon Laborers Union, which lost an estimated $40 million in Capital Consultants investments,
- the Idaho Laborers Union, which had a loss of $10 million, will receive $1.9 million, and
- Local 11, which had a loss of $10 million, and will receive under $1 million
According to court records, Capital Consultants had $927million under management when federal regulators seized its assets in September 2000. The court documents said about $407 million of Capital’s high-risk investments – many now virtually worthless – came from Taft-Hartley and other union plans.
Another settlement was reached with members of plans administered by Portland-based Local 290 of the Plumber, Steamfitters and Shipfitters Union. It calls for a payment of $3.7 million The fund has $29 million at risk due to the investment losses at Capital Consultants, said Chrys Martin, a Portland lawyer representing Local 290.
By mid-March, members of the Eighth District of the International Brotherhood of Electrical Workers are expected to settle a suit against trustees of their funds, said Seattle lawyer Richard Birmingham, who is representing the members.
The Eighth District includes Idaho, Utah, and Colorado. That settlement is expected to be for about $6 million. The trust has $50 million at risk due to investment losses at Capital Consultants.
Union trusts that have lost money through their investments with Capital Consultants are expected to recoup more of their losses in the months ahead in addition to the payments from the suits against the fund trustees.
« Employers Cut Jobs – Not Perks, Pay