The Dep't of Labor agreed to a $3.6 million
settlement of three related lawsuits with trustees of three New
York pension funds.
Trustees Sam Marchio, Gerald Spiridilozzi,
Carmen Nicotera, Richard Alexander, Jack Endryck and Tony Korrie
agreed to repay a total of $930,000 to Laborers' Int'l Union of
No. Am. Local 35 pension fund in Utica, N.Y.
Additionally, trustees John Agati, Sam Agati,
Robert Ashley, Lanny Miller, Fred Rexford and Hugh Schickel agreed
to repay a total of $1.1 million to LIUNA Local 322 pension fund
in Massena, N.Y. Finally, trustees Carl Spatol, Edward Morgan,
Richard Buck and Harold McElwain agreed to repay $960,000 to the
United Bhd. of Carpenters Local 120 pension fund in Utica, N.Y.
Further, the trustees of the three pension
funds also agreed to pay $600,000 in fines to DOL for violating
federal pension law, and to give full discretion to the funds'
investment managers to manage all of the assets.
DOL's suits alleged the trustees violated
their fiduciary duties when they made their pension plans buy
a class of collateralized mortgage obligations and real estate
mortgage investment conduit bonds, generally known as Z-bonds.
Trustees of all three plans used the same broker-dealer to make
In 1994, each plan held a large amount of
these securities, which the plans eventually sold at a significant
loss. The suits alleged the purchases were imprudent because the
trustees did not understand the investments and the risks of purchasing
them, and did not monitor these investments.
The lawsuits also claimed the trustees did not properly investigate the bonds, or consider how the bonds would fit with the plans' funding objectives. [Pensions & Investments 10/4/99]