Members of plumbers and electrical workers unions filed class-action lawsuits in late-Oct. against the trustees of their union retirement and benefit plans in connection with the collapse of the troubled Portland, Or., investment adviser Capital Consultants.
Mark K. Eidem and Marvin A. Malcom, members of the Plumbers Union Local 290 in Portland accused the 9 trustees of the union’s pension trust of breaching their fiduciary responsibility by handing over union members’ retirement money to Capital Consultants. The suit, filed in U.S. Dist. Court in Portland, alleges that the trustees negligently entrusted about $39 million 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 and son Barclay Grayson of making a series of bad investments and concealing losses that could cost its clients more than $243 million.
Also, Andrew McPherson, a member of the Int’l Bhd. of Elec. Workers, filed a similar suit against the 25 trustees of the 8th Dist. Elec. Pension Fund and Health & Welfare Fund of Aurora, Col. The funds, which cover workers from 5 Western states, could lose more than $30 million of its members’ money in failed Capital Consultants investments, the suit alleges.
The 19-page complaint charges that some trustees and their spouses might have received “special favors and gifts” from Capital Consultants in violation of federal rules governing pension plans. The complaint further alleges that trustees, after learning Capital Consultants was on the verge of collapse more than a year ago, failed to disclose the financial losses to plan participants and continued to pay excessive fees to the firm. The suit seeks damages in excess of $40 million, the appointment of a new money management firm and the immediate removal of the defendant trustees.
“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 suits mark the third and fourth time union workers have accused their pension and benefits plan trustees of negligence. In Sept., members of the Laborers’ Int’l Union of N. Am. Local 296 and Office & Prof’l Employees Int’l Union Local 11, also filed complaints.
The three Portland-based unions represented 3 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. [Oregonian 10/31/00; Rocky Mtn. News (Denver) 11/01/00]