James B. Sherman, Esq.
The federal court for the
District of Columbia has ordered trustees of the International Association of
Machinists National Pension Fund, to repay $200,000 to the fund, plus an
additional $40,000 as a civil penalty. As
recently reported by the U.S. Department of Labor, the fund and its trustees
were sued by the Secretary of Labor for alleged violations of the Employee
Retirement and Income Security Act (ERISA). The lawsuit accused the trustees of
breaching their fiduciary duties to the IAM Union Pension Fund participants and
beneficiaries by, among other things:
·
Unlawfully soliciting and accepting gratuities
from plan service providers.
·
Spending/permitting others to spend fund assets
lavishly on unnecessary trips, parties, extravagant food, wine and
accommodations.
·
Creating conflicts of interest and failing to select
plan service providers in the best interests of participants and their
beneficiaries.
In a consent decree accepted and
ordered by the court on July 19th, the defendants agreed to re-pay the very
large sum of money and civil penalty, but admitted to no wrongdoing. The trustees also agreed to adopt a number of
measures designed to prevent activities of the sort the D.O.L. alleged in its
complaint were unlawful under ERISA. For example, the IAM Pension Fund must now
use an independent search consultant to identify service providers and must,
going forward, prohibit the same person from acting as both a consultant and
manager for the fund. The Fund must also maintain records for 6 years,
presumably to allow for monitoring of its use of fund assets.
Of course this is hardly the
first case alleging that union fringe benefit dollars were being misused for parties,
junkets, wining and dining for trustees and their friends. In the past the
Teamsters’ and other labor union employee benefit plans have faced similar
allegations. The consent decree in this
case should be welcomed by current and former members of the Machinist Union
who count on the IAM Pension Fund for their retirements, as well as their
employers who contribute to the Fund.
