Consent order restores $3.5 million, appoints independent fiduciaries and replaces most trustees to Plumbers Local 38 employee benefit plans

Archived News Release — Caution: Information may be out of date.

San Francisco – A consent order resolving a U.S. Department of Labor lawsuit places control of five employee benefit plans sponsored by Local 38 of the United Association of Plumbers, Pipefitters and Journeymen of San Francisco with independent, court-appointed fiduciaries, replacing all but two of the plans’ trustees, and permanently barring them and the former plan administrator from serving as fiduciaries or service providers to any such plans. It also requires payment of $3.5 million to the union’s pension plan from the defendants’ fiduciary liability insurer and additional money may be paid from the expected sale of the Konocti Harbor Resort and Spa on Clear Lake in Kelseyville, California. The order resolves a department suit against the defendants for allegedly diverting plan assets to renovate and operate Konocti Harbor.

“Workers’ retirement dreams, health and other benefits were jeopardized by the gross mismanagement of their benefit plans,” said Secretary of Labor Elaine L. Chao. “This legal action puts the benefit plans under new, independent management and restores at least $3.5 million to the pension plan.”

The department’s 2004 suit alleged violations of the Employee Retirement Income Security Act (ERISA) by current and former trustees Lawrence J. Mazzola Sr. (the business manager and financial secretary-treasurer of Local 38), Lawrence Mazzola Jr., William B. Fazande, Larry Lee, James R. Shugrue, Vohon J. Kazarian, Tom Irvine, Robert E. Buckley, Robert Buckley Jr., Art Rud, Ron Fahy and Robert Nurisso; former plan administrator Frank Sullivan; and Local 38. Filed in federal district court in San Francisco, the suit alleged that the defendants maintained inadequate financial controls, violated plan documents, engaged in self-dealing, and imprudently spent millions to build and maintain facilities at Konocti despite the resort’s continuing financial losses. Local 38 also allegedly profited from the interest on a $6 million loan.

Under the settlement, a court-appointed independent administrator will oversee the plans and implement financial controls to prevent future misuse of the plans’ assets. A second court-appointed fiduciary will have independent and exclusive authority over the property sale and, until it is sold, management and operation of the resort. The current and former trustees no longer have any control over Konocti. In addition, the order requires all pension plan assets to be managed by professional investment managers and overseen by an investment monitor. Mazzola Jr. and Buckley Jr., who had been trustees for fewer years, are permitted to remain as trustees provided they attend training on ERISA fiduciary responsibilities.

The retirement, health, scholarship, apprenticeship, and vacation and holiday funds cover more than 2,000 participants employed throughout northern California.

This case was investigated by the San Francisco Regional Office of the Labor Department’s Employee Benefits Security Administration (EBSA). Employers and workers can contact that office at 415.625.2400 or toll-free at 1.866.444.EBSA (3272) for help with problems relating to private sector pension and health plans.

Chao v. Mazzola;
Civil Action Number C-044949

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