Federal Court Names Independent Fiduciary To Manage Detroit Carpenters' Pension Fund's Participant Mortgage Loan Portfolio

Archived News Release — Caution: Information may be out of date.

National City Bank was named by the federal court as an independent fiduciary to manage the participant mortgage loan portfolio of the Carpenters’ Pension Trust Fund - Detroit and vicinity of Troy, Mich., which was sued in January 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.

The department’s consent judgment also bars the named defendants from further violations of Title 1 of the Employee Retirement Income Security Act, the federal pension law.

Under the consent order’s terms, the independent fiduciary will evaluate all mortgages individually to determine their marketability to non-parties in interest and will implement a procedure to remove impediments and/or encumbrances to the mortgages’ abilities to be sold to third parties on the open market. The ultimate goal is for the plan participants’ mortgage loans to be sold as soon as economically feasible.

When the bank has accomplished its assigned task, it will turn stewardship of the participant mortgage loan portfolio back to the trustees, who’ve agreed not to lend any further plan assets to participants unless they amend the pension plan to permit such loans and only if the amendments comply with ERISA’s requirements.

According to the department’s 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 consent judgment resulted from an investigation conducted by PWBA’s Detroit District Office. It was entered in federal district court in Detroit on October 23.

(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.