LABORERS (LIUNA) / OFFICE & PROFESSIONAL EMPLOYEES
(OPEIU) / PLUMBERS & PIPE FITTERS (UA) / ELECTRICAL WORKERS (IBEW)
Grayson and Ten Other Defendants Settle $110 Million Pension Suit
Dozens of union pension and other benefit funds reached a settlement
May 13 with eleven parties to recover $110 million of losses involving
allegations of pension fraud by the Portland, Or., based Capital
Consultants LLC. Capital Consultants had $927 million under its
management when federal agents seized its assets in Sept. 2000. Funds from
Taft-Hartley plans and other employee benefit plans accounted for a large
share of nearly $500 million in estimated investment losses The demise
of Capital Consultants sparked lawsuits by a number of union trusts, alleging
fraud and seeking to recover some of their losses. The proposed settlement,
yet to be approved by the district court, calls for payments to the trusts
by 11 companies and professional advisers, including legal and accounting
firms.
In addition to the $110 million settlement, the court-appointed receiver has collected $140 million from the operation and sale of Capital Consultants assets. Also, litigation by some union members against their fund trustees resulted in a $16 million settlement in Mar. 2002. In total, plan participants have recovered merely 50% of their losses as the result of these various recovery actions. There are an estimated 500,000 participants in 67 trusts involved in the Capital Consultant litigation.
"This is an unprecedented settlement," Steve English of the Portland law firm of Bullivant Houser Bailey, the lead counsel for the trusts, said in a statement. The resolution of the suits was due in part to the months of mediation led by U.S. Cir. Judge Edward Leavy (9th Cir., Reagan), he said. Legal fees and expenses are expected to be less than 7% of the total recovery, English added.
Most of the settlement money is to be paid by various insurers of the defendants. The settlement amounts are to be paid by the following eleven parties: 1) $40 million from the Wilshire Group and principals, a financial services company that defaulted on $155 million in loans from Capital Consultants. 2) $25 million from Lane Powel Spears Lubersky, Capital Consultants' principal law firm. 3) $17 million from Moss Adams, an accounting firm that served as Capital Consultant's accountant and performed asset valuations of the company's private investments. 4) $12.5 million from Stoel Rives, Wilshire's principal law firm. 5) $8 million from O'Melveny & Myers, an additional law firm used by Capital Consultants. 6) $2.5 million from McCarter & English, a law firm representing a Capital Consultants borrower. 7) $2 million from Weiss Jensen Ellis & Howard, an additional law firm used by Capital Consultants. 8) $1.35 million from C.F. Credit, a California private lender. 9) $1 million from Charles and Joseph Musumeci, owners of CJM Planning of N.J. 10) $500,000 from Barclay Grayson, ex-Capital Consultants president and CEO who recently plead guilty to crimes related to the scandal. 11) $100,000 Bear Stearns, a former lender to Wilshire.
Nevertheless, several of the trusts' claims remain unsettled including claims against Capital Consultants, its owner Jeffrey Grayson, Deloitte Touche, an accounting firm that provided services to Wilshire and Pricewaterhouse Coopers, an accounting firm that provided services to Capital Consultants.
The settlement is subject to an approval hearing June 19 before U.S. Dist. Judge Garr M. King (D. Or., Clinton). The settlement represents a consolidation of 26 lawsuits listed in a May 13 hearing notice by King that summarizes the terms of the settlement. In his hearing notice, King said the settlement is in the best interests of the trusts because it avoids the delay and expense of protracted litigation. Also the settlement allows limited insurance funds to be distributed to investors rather than spent on litigation, he said. King also noted that the settlement prevents the trusts or plan participants from filing future claims against the settling parties. Court documents show that the plaintiffs and the receiver believed that Capital Consultants' professional advisers bore part of the responsibility for the investment losses. However, the settlements contain no admission of wrongdoing by any of the defendants.
Lance Caldwell, an Asst. U.S. Attorney in charge of the Capital Consultants
criminal investigation, said he is pleased that "so much money is being
recovered for innocent victims" but that it will have little effect on
potential new indictments. "The criminal and civil investigations have
been largely separate and will continue that way." In addition to Grayson,
his son Jeffrey L. Grayson and ex-Laborers boss John D. Abbott have also
plead guilty in the case. All have agreed to testify against others who
are still under investigation by a federal grand jury in Portland.[BNA
5/16/02; Oregonian 5/14/02]
Union Corruption Update is made possible by the generous contributions from readers like you. NLPC, PO Box 6821, Falls Church, VA 22040. Thank you.
In addition to the unions and organizations covered in this Union Corruption Update, readers can look forward to news and information on other corrupt and abusive unions in future editions.
All back issues of the Union Corruption Update can be viewed at NLPC's website (http://www.nlpc.org). Also available is a union-by-union and state-by-state index of all Union Corruption Update articles.
If you have story ideas or suggestions for future editions of Union Corruption Update, please email NLPC at nlpc@nlpc.org. Thank you.
Union Corruption Update is part of NLPC's Organized Labor Accountability Project which is investigating and exposing corruption in the Teamsters, LIUNA, AFL-CIO and many other union organizations. NLPC is a nonpartisan, nonprofit foundation promoting ethics and accountability in government through research, education and legal action.
Union Corruption Update Article Index (by Union)
Union Corruption Update Article Index (by State)
Organized Labor Accountability Project