Labor Department Sues Detroit And Vicinity Carpenters' Pension Fund For Prohibited Mortgage Loans

Archived News Release — Caution: Information may be out of date.

The Carpenters’ Pension Trust Fund - Detroit and vicinity of Troy, Mich. - was sued by the U.S. Department of Labor for allegedly making a series of prohibited mortgage loans from plan assets to certain participants of the pension plan.

According to the lawsuit, since September 1995, plan trustees Joseph Molnar, Melvin Stokes, Sr., H. Boyd Harris, Kenneth Stewart, Joseph Gambino, Jr., Anthony Michael, Walter Mabry, Donald Stewart and Donald Salkowski authorized AAA Mortgage Corporation to make “first lien” mortgage loans even though the plan provisions did not allow for such loans. In addition, participants were allowed to pledge their interest in their vested accrued benefits in the plan as collateral for the mortgage loans although such pledges are expressly prohibited by the plan.

As of July 30, 1999, the outstanding principal balances of the alleged prohibited mortgage loans exceeded $14.7 million.

The plan is a multi-employer, Taft-Hartley pension plan established as a result of collective bargaining by the Michigan Regional Council of Carpenters and five employer associations. As of April, 1998, the plan had 16,762 participants and assets totaling $1,043,125,738.

The department is seeking a court order to require the plan and its trustees to correct the prohibited loans and restore to the plan any losses, including interest, that may result from the correction. It also seeks to have all of the defendants barred from violating provisions of Title 1 of the Employee Retirement Income Security Act (ERISA).

The complaint is the result of an investigation conducted by PWBA’s Detroit District Office. It was filed on Jan. 5, 2000, in federal district court in Detroit.

(Herman v. Joseph Molnar, et al)
Civil Action # 00-40007 (Judge Paul V. Gadola)

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Archived News Release — Caution: Information may be out of date.