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Release Date: 02/11/2004
Release Number: 04-208-NAT
Contact Name: Gloria Della
Phone Number: 202.693.8664
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Washington, DC - The U.S. Department of Labor
has sued the trustees of two union-sponsored health plans in Colorado for
imprudently investing plan assets in investments with Capital Consultants
LLC (CCL). The department contends the investments caused the plans to
suffer substantial losses that jeopardized the benefits of more than 2,700
workers. |
“This
is an example of this Administration’s commitment to ensure that
American workers receive all the benefits that they are promised,” said
U.S. Labor Secretary Elaine L. Chao. The Labor Department’s legal
actions in the Capital Consultants cases will help thousands of workers by
restoring their lost assets and improving plan oversight in the future.” |
The
department’s lawsuits allege that the current and former trustees of the
Operating Engineers Health and Welfare Trust Fund of Denver, Co., (Chao v.
Brown) and the Sheet Metal Workers Local No. 9 Health and Welfare Fund of
Denver, Colorado, (Chao v. Keating) violated the Employee Retirement
Income Security Act (ERISA) by imprudently authorizing the investment of
plan assets in a series of risky private placement investments managed by
CCL, including loans to Wilshire Credit Corporation. |
Between
1996 and 2000, the plans invested more than $1.5 million with CCL. The
suits allege the trustees authorized these investments without conducting
an adequate investigation of the merits of the investments. The trustees
of the Operating Engineers plan also allegedly failed to enforce the plan’s
investment policy. |
The department is seeking court orders to require that
the defendants restore any losses to the funds and institute new plan
procedures and controls relating to investments. The suits were filed in
federal district court in Denver, Colorado. The cases resulted from
investigations conducted by the department’s Employee Benefits Security
Administration’s Kansas City regional office. The department has
previously sued the trustees of union plans in Oregon, Ohio and Minnesota
for similar imprudent investments in CCL. |
CCL
was a registered investment manager that provided investment services to
more than 60 primarily union-sponsored pension, health and welfare plans
governed by federal employee benefits law. In 2000, the department and the
Securities and Exchange Commission (SEC) sued CCL and its principals for
investing plan assets in a series of imprudent loans, self-dealing and
charging excessive fees. As a result of the department’s actions, the
court appointed a receiver who has collected more than $140 million, in
addition to more than $130 million obtained through private litigation. |
In
2002, Jeffrey Grayson and his son Barclay Grayson, CCL’s chief executive
officer and president respectively, were indicted on criminal charges
related to the improper investments. The son served a prison sentence. |
(Chao v. Brown) Civil Action No. 04-D-227 (OES)
(Chao v. Keating) Civil Action No. 04-D-228 (OES) |
U.S. Department of Labor
news releases are accessible on the Internet. The information in this news
release will be made available in alternate format upon request (large
print, Braille, audio tape or disc) from the Central Office for Assistive
Services and Technology. Please specify which news release when placing
your request. Call 202.693.7773 or TTY 202.693.7755. |