U.S. Sues Union Firm Over Funds

The Labor Department has sued a major union-backed financial services company, alleging it broke pension laws by making a $10-million investment of retirement funds in a shaky Las Vegas real estate venture.

The suit alleges that the Union Labor Life Insurance Co., through its investment subsidiary Trust Fund Advisors Inc., used Laborers’ International Union pension funds to buy 120 acres of land that was to be developed into residential building sites. No work was done and the project was abandoned.

The land was sold in 1999 to Newport Beach-based developer Capital Pacific Holdings Inc. at a loss of nearly $1 million.

Labor Department spokeswoman Gloria Della said Monday that because the $10 million could have generated substantial earnings during the booming mid- 1990s, the actual loss is far higher than $1 million.

“They started a project and abandoned the project,” she said. “The plan’s money was not put to work. What happened? That is not the action of a prudent plan official.”

The suit was filed Friday in federal court in Washington and made public Monday. Citing violations of the Employee Retirement Income Security Act, it asks the defendants to reimburse the union’s funds for all losses and interest.

Attorney Ian D. Lanoff, representing Union Labor Life and Trust Fund Advisors, said both “acted appropriately and prudently as fiduciaries to the investment in this case, and ... they will be completely vindicated at the end of the process.”

Union Labor Life, which was created in 1925 to provide health insurance for union families, offers insurance, investment and banking services to all businesses with a focus on unions and their members.

In 2000, the company handled $6billion in third-party assets, much of it in union pension funds. Union Labor Life Chief Executive Bob Georgine was the former top official in the Building Trades Department of the AFL-CIO.

Officials with the laborers union declined to comment about the lawsuit.

A union source said the organization and its pension plans were not involved in the investment decision and had tried to recover damages from Union Labor Life before the suit was filed.

Della, of the Labor Department, said no trustees of the pension fund were involved in the purchase or sale of the property.