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Release Date: April 11, 2008
Release Number: 08-319-CHI
Contact Name: Gloria Della/Richard Manning
Phone Number: 202.693.8664/202.693.4676
Suit alleges misuse of assets for personal gain
through improper actions
Chicago — The U.S. Department of Labor today
sued Chicago-based AA Capital Partners Inc. and its executives for
improperly causing more than $25 million in losses for five Michigan
pension funds by misusing plan assets to benefit themselves and by
charging the plans excessive investment management fees. The Labor
Department’s suit seeks to restore all losses incurred by the plans as
a result of the defendants’ improper actions.
“This case involves gross abuse of the trust that
workers and their families placed in the management of these pension
funds,” said Secretary of Labor Elaine L. Chao. “We are seeking full
restitution to the pension plans, including the illegal profits that the
defendants realized at the expense of workers and their families.”
The department’s suit alleges that AA Capital
Partners, its co-owner and president John Orecchio, chief financial
officer Mary Elizabeth Stevens, and affiliate AA Capital Liquidity
Management LLC violated the Employee Retirement Income Security Act (ERISA)
by imprudently misusing plan assets and charging the plans excessive
fees on investments.
The pension plans covered more than 60,000
participants of the Carpenters Pension Trust Fund of Detroit and
Vicinity, Operating Engineers Local Number 324 Pension Fund, Michigan
Regional Council of Carpenters Annuity Fund, Millwrights’ Local Number
1102 Supplemental Pension Fund and Michigan Teamsters Joint Council #43
Pension Fund. As of April 30, 2006, the pension plans had total assets
of approximately $3.1 billion, the latest data available.
At various times from 2002 to 2006, the defendants
are alleged to have improperly used $25.9 million of the plans’ assets
to pay for, among other things, the operating expenses of the firm,
renovations to a horse farm and a strip club managed by Orecchio. In
addition, they allegedly caused the plans to pay unauthorized fees to AA
Capital Partners. The suit seeks a court order to require that the
defendants restore to the plans all losses, return illegal profits and
correct transactions prohibited by law. The suit also asks that the
defendants be permanently barred from serving as fiduciaries to any plan
governed by ERISA in the future.
AA Capital Partners is a registered investment
advisory firm to employee benefit plans, including ERISA-covered benefit
plans. The firm created AA Capital Liquidity Management as the general
partner for a fund that invested in real estate loans and entities that
developed real property. As a result of a Sept. 13, 2006, lawsuit filed
by the Securities and Exchange Commission, AA Capital Partners was
placed in the hands of a court-appointed receiver.
The Chicago Regional Office of the Labor Department’s
Employee Benefits Security Administration (EBSA) investigated this case.
The suit was filed in federal district court in Chicago. Last year, EBSA
achieved monetary results of $1.5 billion in retirement, 401(k), health
and other benefits for American workers. Employers and workers can
contact the Chicago office at 312.353.0900 or EBSA’s toll–free
number, 866.444.3272, for help with problems relating to private sector
health and pension plans.
Chao v. AA Capital Partners Inc.
Civil Action Number 1:08-cv-2029
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