New York Boss Funds Settle Suit for $3.6 Million

The Dep’t of Labor agreed to a $3.6 million settlement of three related lawsuits with trustees of three New York pension funds. Trustees Sam Marchio, Gerald Spiridilozzi, Carmen Nicotera, Richard Alexander, Jack Endryck and Tony Korrie agreed to repay a total of $930,000 to Laborers’ Int’l Union of No. Am. Local 35 pension fund in Utica, N.Y. Additionally, trustees John Agati, Sam Agati, Robert Ashley, Lanny Miller, Fred Rexford and Hugh Schickel agreed to repay a total of $1.1 million to LIUNA Local 322 pension fund in Massena, N.Y. Finally, trustees Carl Spatol, Edward Morgan, Richard Buck and Harold McElwain agreed to repay $960,000 to the United Bhd. of Carpenters Local 120 pension fund in Utica, N.Y.

Further, the trustees of the three pension funds also agreed to pay $600,000 in fines to DOL for violating federal pension law, and to give full discretion to the funds’ investment managers to manage all of the assets. DOL’s suits alleged the trustees violated their fiduciary duties when they made their pension plans buy a class of collateralized mortgage obligations and real estate mortgage investment conduit bonds, generally known as Z-bonds. Trustees of all three plans used the same broker-dealer to make the purchases. In 1994, each plan held a large amount of these securities, which the plans eventually sold at a significant loss. The suits alleged the purchases were imprudent because the trustees did not understand the investments and the risks of purchasing them, and did not monitor these investments. The lawsuits also claimed the trustees did not properly investigate the bonds, or consider how the bonds would fit with the plans’ funding objectives. [Pensions & Investments 10/4/99]