Rhode Island Financial Services Company and President Sued by U.S. Labor Department to Recover Losses to Electrical Workers' Pension Plan

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor has filed suit in U.S. District Court for the district of Rhode Island against the now defunct CPI Financial Services, Inc., of Providence, Rhode Island, and the company’s president Todd LaScola, alleging violations of the federal Employee Retirement Income Security Act (ERISA).

According to James Benages, Boston Regional Director for the Department’s Pension and Welfare Benefits Administration (PWBA), the suit alleges that, between August 1996 and December 1998, CPI served as investment manager to the International Brotherhood of Electrical Workers Local Union No. 99 Retirement Plan, a multi-employer pension plan covering some 600 workers in and around Rhode Island. As CPI president, LaScola allegedly invested approximately $5,970,000 of the Plan’s assets (over twenty percent of the Plan’s total assets) in notes issued by real estate limited partnerships owned by RBG Management Services, Inc., of Chicago, Illinois.

The suit alleges that the RBG notes were unregistered, highly risky securities for which there was no trading market and, therefore, the investments in them violated the pension plan’s investment guidelines in numerous ways. For making these improper investments, CPI and LaScola received approximately $312,400 in commissions from RBG Management Services, Inc. In addition, CPI and LaScola received $127,652 in management fees from the Plan.

Benages noted that, in November 1998, the Trustees of the Plan demanded that CPI and LaScola immediately liquidate the improper investments. The defendants subsequently returned $5,993,813.20 to the plan. (That money was obtained through other allegedly illegal acts by LaScola.) Among other things, the Labor Department suit alleges that the defendants violated ERISA’s mandate that fiduciaries act prudently and solely in the interest of the Plan’s participants and beneficiaries, causing the Plan to earn substantially less money than it would have if the Plan’s assets had been invested in a prudent manner.

Said Benages, “The defendants’ actions constitute a totally unacceptable and illegal misuse of a pension plan’s assets.” He stressed that ERISA protects employee pension and welfare benefit plans by prohibiting those entrusted with the management of plan assets from misusing those funds for personal gain.

The Labor Department suit asks the court to permanently prohibit CPI and LaScola from ever again acting as a fiduciary or service provider to any ERISA-covered plan; require the defendants to restore to the Plan all losses incurred as a result of their violations; require the defendants to undo their prohibited transactions and return all profits, plus interest, to the Plan; and to require the defendants to repay to the Plan all fees, commissions or other compensation they received from the Plan.

While the department’s lawsuit is a civil action, Benages noted that, on November 16, 2000, LaScola was indicted on fifty-five federal counts of embezzlement, deceit and fraudulent financial transactions relating to, among other things, his actions regarding the Electrical Workers pension plan.

The department’s legal action against the defendants followed an investigation by the Boston Regional Office of the Pension and Welfare Benefits Administration, which enforces ERISA. That office is located in Room 575 of the John F. Kennedy Federal Building in Boston. The telephone number is 617.565.9600.

(Solano v CPI Financial Services, Inc., and Todd LaScola
Civil Action No. 01-47L)

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