Bureau Of National Affairs
Thursday, October 4, 2001
Former Investment Firm Owner Faces 22 Criminal Charges in Pension Fund Case
PORTLAND, Ore.--The former owner and manager of an investment company was charged Oct. 2 with 22 criminal counts in connection with alleged payoffs to a former Laborers' International Union pension fund trustee.
A federal grand jury issued an indictment against Jeffrey Grayson charging him with mail fraud, money laundering, witness tampering, conspiracy and giving a gratuity to an employee benefit plan trustee.
Grayson was the owner and manager of Capital Consultants LLC, a Portland investment management company, that allegedly lost more than $100 million in union trust pension plan funds. The firm has been in federal receivership for more than a year and is subject to a number of civil lawsuits by federal regulators and union trusts.
The Oct. 2 criminal indictment was not unexpected, nor may it be the last criminal indictment filed against Grayson. The indictment focuses narrowly on bribes Grayson allegedly made to John Abbott, a former business manager of the Oregon, Southern Idaho and Wyoming District Council of Laborers. While Abbott was in that position, until late 1998, he was a trustee of a number of the council's pension plans that invested funds with Grayson's firm.
Abbott pleaded guilty Feb. 26 to charges of receiving payoffs from Grayson. The current charges against Grayson involve the same payoffs, but in the context of the person who made the payoffs instead of the one who accepted them, according to Assistant U.S. Attorney Lance Caldwell. Abbott has agreed to cooperate with the government in its case, which could include testifying against Grayson at a trial, Caldwell said.
The Oct. 2 indictment charges that from 1990 to 1998 Grayson schemed to defraud the Laborers' pension plans by making secret payments to Abbott in violation of both their fiduciary duties to the plans. The indictment charges that Grayson paid Abbott $150,000 in cash, plus in-kind payments valued at $53,750, so that the union would continue to send funds to Capital Consultants to manage.
The indictment said Grayson executed his scheme, in part, by sending bills through the mail for his fees. The indictment charges 14 counts of mail fraud.
The indictment also calls for three counts of money laundering, one count of conspiracy, and three counts of giving a gratuity to a trustee of an employee benefit plan. It also charges one count of witness tampering concerning the testimony of a former Grayson employee to the federal grand jury. The indictment charges that Grayson tried to persuade Mostafa Arooni to say that some of the money used to bribe Abbott was given to him to help with a sick relative.
The 22 counts carry substantial possible prison sentences. For example, each of the 14 mail fraud charges are punishable by up to five years in prison, and the three money laundering charges carry a 20-year maximum sentence each.
A significant portion of the Laborers' pension money was sent to Capital to manage, although it is unclear how much. In one of the civil lawsuits filed by some Laborers' union members against the plans' trustees, the plaintiffs allege losses of $25 million.
A federal grand jury continues its work on possible future criminal charges, such as fraud, against Grayson and perhaps others associated with Capital Consultants' mismanagement of union pension funds.
Copyright © 2001 by The Bureau of National Affairs, Inc., Washington D.C.