Lascola Ordered To Repay $1.279 Million To Electrical Workers' Pension Plan

Archived News Release — Caution: Information may be out of date.

Boston, Massachusetts - CPI Financial Services, Inc., and company president Todd LaScola must repay $1,279,656 to the retirement plan of IBEW Local 99 under terms of a federal default judgment. U.S. District Judge Ronald R. Lagueux signed the order July 24, after the company and LaScola failed to respond to a law suit filed in January by the U.S. Department of Labor accusing them of misusing plan assets.

The department’s suit, alleging violations of the Employee Retirement Income Security Act (ERISA), resulted from an investigation by the Boston regional office of the Pension and Welfare Benefits Administration (PWBA), according to PWBA Regional Director James Benages.

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. The lawsuit alleged that as CPI president, LaScola invested approximately $5,970,000, over 20 percent the plan’s total assets, in unregistered, highly risky notes issued by real estate limited partnerships owned by RBG Management Services, Inc., of Chicago.

The suit alleged there was no trading market for the RBG notes, making the investment a violation of the pension plan’s investment guidelines. CPI and LaScola received approximately $312,400 in commissions from RBG Management Services, Inc., as well as $127,652 in management fees from the plan.

Benages noted that, in November 1998, plan trustees demanded the improper investments be immediately liquidated by CPI and LaScola, who subsequently returned $5,993,813.20 to the plan. However, that money was obtained through other allegedly illegal acts by LaScola, for which he is currently serving a federal prison term.

ERISA requires fiduciaries to act prudently and solely in the interest of plan participants and beneficiaries. The suit charged the defendants violated the law by causing the plan to earn substantially less than prudent investments would have earned. “Opportunity losses” totaled $839,603, according to the Labor Department.

The amount ordered to be repaid is the total of the opportunity losses plus the commissions and management fees. LaScola must first satisfy his criminal restitution obligations before making these payments
“The defendants’ actions were a totally unacceptable and illegal misuse of a pension plan’s assets,” Benages said. 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.

(Chao v. CPI Financial Services, Inc., and Todd LaScola
Civil Action No. 01047L.)

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