DOL Obtains Nearly $5 Million Settlement in Cap. Consultants Cases

The U.S. Dept. of Labor (DOL) has filed settlement agreements providing for restitution of $4.875 million to 12 pension and welfare plans in Calif., Nev. and Utah that invested plan assets in risky private placement schemes with Capital Consultants LLC.  The consent orders also require payment of $975,000 in civil penalties to the government.


“The hardworking men and women whose plans invested with Capital Consultants trusted the plan fiduciaries to protect and preserve their union-sponsored pension and health benefits.  The Labor Department’s legal actions in these Capital Consultants’ cases will restore more than $4.8 million in lost assets to pay benefits to thousands of union workers,” said U.S. Secretary of Labor Elaine L.



The proposed court orders also impose reforms in the controls and procedures related to investments by the plans. These changes include specific requirements for selecting and contracting with investment managers, implementing written investment guidelines and communicating with plan fiduciaries.  The settlements resolve five lawsuits alleging that the trustees violated the Employee Retirement Income Security Act (ERISA) by imprudently authorizing plan assets to be invested in a series of risky private placement investments managed by Capital Consultants.  The suits contend the trustees failed to adequately investigate the merits of making the investments on behalf of the plans. In addition, the trustees did not monitor the investments and failed to follow the plans’ investment guidelines.


Capital Consultants, LLC was a registered investment manager that provided investment services to more than 60 primarily union sponsored pension, health and welfare plan clients governed by federal employee benefits law.  Based on the efforts of the court appointed receiver and settlement of private suits, the receivership has accumulated more than $250 million.  In April 2002, DOL sued trustees of 10 union plans in Oregon, Idaho and Colorado for authorizing imprudent investments.  Since then, the department sued the trustees of nine plans in Colorado, Ohio and Minnesota for similar violations.


The settlements cover more than 17,000 participants and beneficiaries of the: Shopmen’s Iron Wrkrs. Health & Welfare Trust Fund and Retirement Plan of Sou. Calif.; Utah Carpenters & Cement Masons Pension Trust and Health & Welfare Trust of Salt Lake City; Teamsters Local 533 Health & Welfare Trust Fund and Vacation Savings Trust of Reno, Nev.; North. Nev. Laborers Health & Welfare Trust Fund & Pension Fund, and Construction Wrkrs. Vacation Savings Plan in Reno; and the Carpenters Health Insurance Fund, Pension Fund & Savings Plan of North. Nev. in Reno.  The 12 plans had approximately $216 million in assets as of 2001.


The Los Angeles and San Francisco regional offices of the DOL’s Employee Benefits Security Admin. investigated the cases. [EBSA, 3/23/04]