A federal grand jury in Portland, Or., indicted union fund manager Jeffrey L. Grayson on Oct. 2 on twenty-two counts of mail fraud, conspiracy, money laundering, witness tampering, and making illegal payments to a union pension fund trustee. Grayson’s clients, many of them union pension funds, have lost $355 million in failed and allegedly fraudulent investments in what the Sec. & Exch. Comm’n calls the biggest fraud by an investment manager in U.S. history.
The indictment alleges that Grayson paid more than $200,000 to an ex-boss of the Laborers’ Int’l Union of N. Am., John D. Abbott, who steered millions of dollars in pension and trust fund money to Grayson’s firm, Capital Consultants. Abbott, ex-chairman of four of LIUNA funds, allegedly conspired with Grayson to conceal the payments. Grayson also allegedly tried to pressure an employee to lie to a grand jury about the payments to Abbott.
Also, in Sept. 2000, Dep’t of Labor and SEC sued Grayson and his firm, alleging that Grayson was using a Ponzi-like scam to hide massive losses. He was ousted from the firm and the court appointed a receiver to liquidate it. Clients have filed civil suits to recover some funds as well.
Abbott was business manager of LIUNA’s Or., S. Idaho & Wyo. Dist. Council and a trustee on two pension plans, a 401(k) plan, and a health and welfare plan. He pled guilty in Feb. to taking payoffs from Grayson and filing a false tax return. Grayson’s son, Barclay, pled guilty to mail fraud in Mar. Both Abbott and Barclay, agreed to cooperate. The government is recommending a fifteen month sentence for Abbott and eighteen months for Barclay.
Asst. U.S. Atty. Lance Caldwell said a probe is continuing into “allegations of fraud in connection with Capital Consultants’ investments” including $160 million in loans to the former Wilshire Credit Corp.Wilshire’s top leaders, Andrew A. Wiederhorn and Lawrence A. Mendelsohn have been notified they are targets of the probe. Caldwell also said the indictment does not preclude additional charges against Grayson at a later time. [Oregonian 10/3/01]