EBSA Press Release: New York Carpenters' Plans To Receive Over $50 Million [05/06/1997]

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Three employee benefit funds of the New York District Council of Carpenters will receive more than $50 million to reimburse them for improper transfers to the union's welfare fund, according to a consent judgment obtained by the U. S. Department of Labor.

The judgment resolves a lawsuit filed by the Labor Department on July 2, 1996, against the trustees of the funds, alleging they violated the Employee Retirement Income Security Act (ERISA).

"Sponsoring employers have no business dipping into retirement plans to subsidize improper expenses," said Labor Secretary Alexis M. Herman. "This consent judgment returns the money to where it belongs--to pay for the benefits of workers."

As part of the judgment, fund trustees must institute procedures to assure that expenses are properly paid by the funds for vehicles, telephones and other expenses, ensure that records are maintained and that expenses are properly apportioned among the funds. Finally, the judgment stipulates that the pension fund shall execute leases with the District Council and its locals for space rented at 395 Hudson Street in New York City.

The New York City District Council of Carpenters sponsors pension, annuity, vacation, welfare and apprenticeship plans under collective bargaining agreements with contributing employers. The plans cover more than 23,000 members. Collectively, the funds had in excess of $1 billion in assets at the end of September 1993.

In its lawsuit, the Labor Department alleged the trustees of the funds:

• transferred more than $37.6 million from the pension, annuity and vacation funds to the welfare fund;
• failed to collect money transferred to the welfare fund;
• paid the leases and insurance on luxury vehicles, including cellular telephones, used by numerous employees of the funds without determining whether such use was needed and the costs reasonable;
• failed to enter into leases and collect rent owed to the pension and apprenticeship funds by the District Council, union locals and the other funds;
• compensated employees Alan Burns and Dominick Lavacca without monitoring services they provided to the funds and failed to obtain reimbursement for services performed for the Council at plan expense.

Named in the department's lawsuit are former union trustees of the funds, some of whom were removed by the international of the AFL-CIO, current and former employer trustees of the funds, the District Council, Resilient Floorcoverers Local 2287 and United Brotherhood of Carpenters and Joiners of America Local 1456. The individual trustees named as defendants were Frederick W. Devine, John Abbatemarco, Charles Terjesen, Robert Cavanaugh, Julius Kleinstein, Paul J. O'Brien, Edmund Greco, Alvin M. Jaff, Richard Harding Jr., John A. Brunetti and Michael Crimi.

The case resulted from an investigation by the New York Regional Office of the Pension and Welfare Benefits Administration. The judgment was entered on May 2 in federal district court in New York City.