Plan Sponsor

Laborers' Damage Control

Chuck Agles hopes to guide $15 billion of scandal-wracked union pensions into prudent investments.

Stephen J Govoni

February 1994

What do you do when the newspapers point out that one of your union's local pension boards have approved multi-million dollar fraudulent real estate deals? If you are Arthur Coia, president of the 500,000 member Laborers International Union of North America, you find someone from the private sector to develop investment policies, work out a corporate governance policy, and identify viable economically targeted projects.

Last June, Coia hired Chuck Agles, formerly senior vice president for retail banking with Detroit-based Comerica Bank, as director of investments. The 51-year-old executive's task: to be a resource that helps 110 widely dispersed Laborers locals, with some $15 billion in total pension assets, better manage their portfolios.

Some of those assets have been notoriously ill-managed. In 1990, for example, the Mason Tenders District Council of New York, a regional which runs the pensions of ten Laborers locals, loaned a member of the Genovese crime family $15.85 million to buy a building on West 18th Street in Manhattan for $7.45 million. Nine months later, the Laborers fund allegedly purchased that same building for $24 million-all in the middle of the worst downturn in New York real estate since the 1960s.

Following an investigative series in New York Newsday, three union officials and two reputed mobsters were indicted in September 1992 on racketeering charges that included embezzling millions in crooked real estate deals. Frank Lupo, former president of the Mason Tenders District Council of New York, pled guilty in the case.

While criminal charges are still pending against several defendants in the Laborers case, Agles is establishing underwriting guidelines for real estate projects. Guidelines are also in the works for investments that would create jobs for union members-an avenue the union is determined to pursue. Agles is quick to note that Laborers plan participants would expect returns of 10% to 12%. "If they're not bankable projects, we can't do them," he says emphatically.

In fact, returns have averaged in the low double-digits in recent years on the bulk of the Laborers funds, which are in a fairly conventional mix of equity and fixed income securities, Agles says. Agles' authority is limited to advising trustees and packaging investment ideas. "I'm not going to say they'll eliminate the criminal stuff," he notes. "But we should be able to avoid some of the locals getting into investments that don't seem prudent." His advice and attention are having some effect. Agles helped one local avoid a chancy ETI-related project, a proposed $500 million industrial park in southern Illinois. The developer was looking for an $8 million infrastructure loan from the Laborers, but Agles was skeptical. "The developer had not outlined the plan very well. So I stepped away from it," Agles says.

Agles has also set up a database to track equity and fixed income investments for all of these funds, and eventually, to coordinate proxy voting activities. This, he believes, will give the Laborers a more powerful voice in corporate governance issues.

"This system will be looked at by a lot of union pension funds, because it enables them to gather at a glance what their portfolios look like," Agles predicts. For a union fund that until recently received attention only of the unpleasant kind, that should come as a relief.

Copyright © 1998 Asset International, Inc. All rights reserved. Plan Sponsor February 1994.

Return to

(c) All original work Copyright 1998. All rights reserved..