Seven union members become the second Portland labor group to claim officials mismanaged their 401(k) money by giving it to Capital Consultants
By Jeff Manning of The Oregonian staff
October 11, 2000
Members of a second Portland union have sued the trustees of their retirement fund, claiming they breached fiduciary responsibility by handing over the entire fund to Portland money manager Capital Consultants LLC.
Seven members of the Office and Professional Employees International Union, Local 11, filed a class-action lawsuit in U.S. District Court on Tuesday against 10 trustees and one former trustee of Local 11's 401(k) Retirement fund.
Dan Feinberg, the Oakland, Calif.-based attorney representing the union members, claimed the 401(k) fund has lost at least as much as $10 million, 18.8 percent of the fund's total assets, through Capital Consultants' alleged fraudulent investments.
The federal government seized control of Capital Consultants in mid-September claiming the firm's two top executives were running a "Ponzi-like scheme" to conceal the loss of $160 million in bad loans to the former Wilshire Credit Corp.
In two separate complaints, the U.S. Department of Labor and the U.S. Securities & Exchange Commission charged that, to hide the disaster, Capital Consultants invested another $71 million of its clients' money in front companies, deepening the loss to more than $200 million.
The court appointed a receiver to take control of Capital Consultants and took steps to ban Jeffrey Grayson and Barclay Grayson, the firm's two top executives, from the investment industry.
All of the seven plaintiffs in this latest suit are employees of the United Food & Commercial Workers Northwest Federal Credit Union. "We want to look out for members of this union," said Priscilla Klein, a loan officer at the credit union."We're absolutely angry."
The suit claims that about 3,200 union members and their beneficiaries are potentially affected by the loss.
The lawsuit mirrors an earlier suit filed two weeks ago by two members of the Oregon Laborers Union Local 296 against trustees of three different Laborers trusts. More recently, the trustees of Local 11 401(k) fund and eight other union trusts sued Capital Consultants, the Graysons and others.
The most recent complaint lists as defendents Gary Kirkland, Judy L. O'Connor, Bradley Eagleston, David B. Anderson, Wally Mehrens, Bob Williams, Joy Cohrs, Michael Richards, Stacy L. Bland, Kirk D. Stanford and Scott Noll.
All but Noll are current trustees of the Local 11 401(k) fund.
Kirkland, the powerful business manager of Local 11 and co-chairman of the trust, is singled out in the lawsuit. Kirkland's son is Dean Kirkland, a prominent salesman at Capital Consultants.
The Kirklands traveled to Alaska twice in 1997 to fish for salmon and to hunt moose, the lawsuit alleges, excursions that were partially paid for by Capital Consultants. "Gary Kirkland's family connection to CCL (Capital Consultants) has played an important role in the Defendant trustees' decision to retain CCL as an investment manager," the suit claims.
Gary Kirkland was unavailable for a comment. He did not return telephone requests for an interview. Bob Williams, another fund trustee and defendant, said they were simply deceived by Capital Consultants. "We were sold a bill of goods," Williams said.
Others named in the suit couldn't be reached for comment.
Like many union pension trusts, Local 11's 401(k) trust is made up of equal parts labor union and company, or employer representatives. Minutes of the trust's recent meetings indicate that two sides were deadlocked over what to do about Capital Consultants.
At their June 7, 2000, meeting, trustees discussed replacing Capital Consultants but did not take any action. At the same meeting, David Anderson, a trustee, moved twice to restrict the loans that the Graysons could make with the 401(k) fund's money.
Both the motions failed, with Kirkland and the other union trustees voting against them, according to the minutes.
The Local 11 members seek to tap into the trustees' liability insurance coverage to make the plan whole. They also seek to remove the current fund trustees.
You can reach Jeff Manning at firstname.lastname@example.org or at 503-294-7606.