U.S. Labor Department resolves lawsuit with trustees of Ohio Sheet Metal Workers pension plan

Archived News Release — Caution: Information may be out of date.

Cleveland – The U.S. Department of Labor today obtained consent orders requiring trustees of the Cleveland-based Sheet Metal Workers Local 33 Pension Plan to restore $625,000 to the plan, pay a $125,000 civil penalty, and institute controls and reforms over future investments made by the plan. The court order resolves a lawsuit involving risky investments authorized by the trustees with Capital Consultants LLC of Portland, Oregon.

“Hardworking men and women relied on the plan trustees to protect their union-sponsored pension benefits,” said Bradford P. Campbell, assistant secretary of the department’s Employee Benefits Security Administration. “Our legal action puts in place necessary reforms to protect the plan and its assets in the future.”

In 2005, the department sued trustees Alan Chermak, Ken Castro, Donald Skala Jr., Richard Rohaley and Robert Finley for alleged violations of the Employee Retirement Income Security Act by allowing the plan to make imprudent and risky investments. The pension plan covered 1,376 participants and had $95,871,140 in assets as of April 2007, the latest data available.

Between 1998 and 2000, the trustees allowed plan assets to be used by Capital Consultants to make loans, even though the loans violated the plan’s investment guidelines. They also allegedly allowed the plan to invest more than 10 percent of its total assets under management with Capital Consultants with a single borrower – Wilshire Credit Corp. – in violation of the plan’s investment agreement with Capital Consultants. The money recovered under this consent order is in addition to the money the plan recovered through the Capital Consultants court-appointed receiver.

Capital Consultants was a registered investment manager that provided investment services to more than 60 clients, including union-sponsored pension and health plans governed by federal employee benefits law. Since 2002, the department has obtained permanent bars against 32 trustees of 34 union plans in Arizona, California, Colorado, Idaho, Minnesota, Nevada, Ohio, Oregon and Utah for authorizing imprudent investments through Capital Consultants. Through the efforts of the Labor Department, its court-appointed receiver and private settlements, more than $300 million has been recovered for clients that invested with Capital Consultants, along with more than $1.8 million in assessed civil penalties and 11 criminal indictments.

The Cincinnati Regional Office of EBSA investigated this case. The suit was filed in federal district court in Cleveland. In 2007, EBSA achieved monetary results totaling $1.5 billion in retirement, 401(k), health and other benefits for American workers. Employers and workers can contact the agency’s Cincinnati office at 859.578.4680 or EBSA’s toll–free number, 866.444.3272, for help with problems relating to private sector health and pension plans.

Chao v. Chermak
Civil Action Number 05cv1935

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