Members of the plumbers and electrical workers unions say administrators were negligent in their dealings with Portland-based Capital Consultants
By Jeff Manning of The Oregonian staff
Tuesday, October 31, 2000
Members of two more unions have filed class-action lawsuits against the trustees of their union retirement and benefit plans in connection with the collapse of Portland investment adviser Capital Consultants LLC.
Mark K. Eidem and Marvin A. Malcom, both members of the Plumbers Steamfitters and Shipfitters Union, Local 290, in Portland accused the nine trustees of the union's 401(k) pension trust of breaching their fiduciary responsibility by handing over union members' retirement money to Capital Consultants.
The suit, filed in U.S. District Court in Portland, alleges that the trustees were negligent in entrusting about $39 million from 9,000 mostly Oregon-based union members to Capital Consultants.
The investment advisory firm was taken over by the government last month. Federal regulators accused Capital Consultants and its two top managers, Jeffrey Grayson, 58, and son Barclay Grayson, 30, of making a series of bad investments and concealing losses that could cost its clients more than $243 million.
Also last week, Andrew McPherson, a member of the International Brotherhood of Electrical Workers, filed a similar suit against the 25 trustees of the Eighth District Electrical Pension Fund and Health & Welfare Fund of Aurora, Colo. The Eighth District trusts, which represent more than 9,600 workers from five Rocky Mountain states, could lose more than $30 million of its members' money in failed Capital Consultants investments, the suit alleges.
"Trustees owe an enormous amount of diligence" to the union members whose money they are investing, said Richard Birmingham, a Seattle lawyer representing the plaintiff workers in both cases. "It's our belief that in this case, none of that due diligence took place."
The new lawsuits mark the third and fourth time union workers have accused their pension and benefits plan trustees of negligence. Late last month, members of the Oregon Laborers, Local 296, as well as the Office and Professional Employees International Union, Local 11, also filed complaints.
The three Portland-based unions -- the Plumbers, the Laborers and the Office Employees -- represented three of Capital Consultants largest clients. Between them, they entrusted about $340 million to the Graysons' firm, about a third of Capital Consultants' total assets under management.
Chrys Martin, a Portland lawyer representing the Plumbers' trustees, pointed to the stinging report issued Friday by the government-appointed receiver in charge of Capital Consultants. Thomas Lennon, who took over the money manager on Sept. 21, claimed that the firm and the Graysons' repeatedly misled its clients about problem investments.
"We have no evidence that any trustee knew about this scheme," Martin said.
Matthew Kissane, a San Diego lawyer representing the Eighth District trustees, said his clients fell victim to bad advice from its financial advisers and former lawyer. "The trustees hired experts who are authorities in these matters to advise them," Kissane said. "They followed the doctors' advice. And now they're on the hook for it."