Bureau Of National Affairs
Union Members, Trustees Settle Lawsuits In Oregon ERISA Pension Fraud Case
By Tom Alkire
Tuesday, March 12, 2002
PORTLAND, Ore.--Members of three unions settled lawsuits against their pension fund trustees March 7 in a case involving allegations of pension fraud by Capital Consultants LLC, a Portland, Ore., investment management company (Miller v. Clinton, D.Ore., No. CV00-1317, 3/7/02; Olsen v. Larson, D. Ore., No. CV01-480, 3/7/02; Schultz v. Kirkland, D.Ore., No. CV00-1377, 3/7/02).
Members of two more unions plan to settle suits against their trustees by mid-March. The total recovery of all five actions is $16 million.
Capital Consultants had $927 million under its management when federal regulators seized its assets in September 2000. Funds from Taft-Hartley plans and other union plans accounted for $407 million of the high-risk private investments made by the company, many of which may now be nearly worthless, according to court documents.
The Department of Labor estimated that the union funds lost more than $100 million due to risky investments made by Capital Consultants.
Since the firm went into receivership, lawsuits have been filed from many quarters seeking to recoup the losses. The civil lawsuits fall into three basic categories: those filed by federal regulators against Capital Consultants, those filed by the union pension funds against Capital Consultants and their legal and financial advisers, and those filled by union members against their own pension fund trustees. Criminal charges also have been filed against some of the upper management at Capital Consultants and one former Laborers' union leader.
The lawsuits against the fund trustees alleged breach of fiduciary duty, said Dan Feinberg, an Oakland, Calif., lawyer representing members of three unions. The three unions are the Oregon Laborers Union, the Idaho Laborers Union, and Local 11 of the Office and Professional Employees International Union based in Portland.
All the settlements are funded by the funds' fiduciary liability policies and not by individual trustees. None of the settlements admits any liability on the part of the trustees.
The settlements with the two laborers' unions were filed March 7 with the U.S. District Court for the District of Oregon. A similar settlement for members of Local 11 will be filed by mid-March, Feinberg said.
Feinberg said the settlements call for a payment of $4 million to the trust funds administered by the Oregon Laborers Union, which lost an estimated $40 million in investments made by Capital Consultants. 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, will receive just under $1 million.
Another settlement was reached March 7 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 (Eidem v. Trustees United Ass'n Union Local No. 290 Plumber, Streamfitter and Shipfitter Indus. 401(k), Pension Trust and Welfare Trust, D. Ore., No. CV00-1446, 3/7/02). 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 scheduled to settle a suit against trustees of their trust 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. Negotiations initiated by the trusts appear to have resulted in a tentative settlement with some of the defendants but the details of the settlement have yet to be approved by the court or made public. Also, the receiver has been liquidating some of the assets held by Capital Consultants, and proceeds from such sales will be going to trusts and other investors.
Copyright © 2002 by The Bureau of National Affairs, Inc., Washington D.C.