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WASHINGTON – The U.S. Department of Labor filed suit on Aug. 28 against the trustees of seven union-sponsored pension and health plans for imprudently investing plan assets in risky private placement investments with Capital Consultants LLC, which resulted in substantial losses to more than 19,000 workers. According to a representative from court-appointed receiver Thomas Lennon’s office, credit unions were not among the clients that suffered losses, but the Credit Union Association of Oregon (CUAO) has been watching the developments because the now-defunct CCL was based in Portland. “I have been following this situation with some interest and am not aware of any direct impact on any of our credit unions,” said Gene Poitras, president of CUAO. “Indirectly, I’m certain that members of some union credit unions were impacted by this.” Poitras said the association might consider “polling union-related credit unions for individual stories and what, if anything, they did to help their members.” CCL was a registered investment manager that provided investment services to more than 60 primarily union-sponsored pension, health and welfare plan clients governed by federal employee benefits law. In 2000, the Dept. of Labor and the Securities and Exchange Commission sued CCL and its principals for investing plan assets in a series of “imprudent loans, self-dealing and charging excessive fees.” In April 2002, the department sued trustees of 10 union plans – mostly on the West coast – for similar violations. As a result of the department’s actions, the court appointed a receiver who has collected more than $140 million in addition to $110 million obtained through private litigation. The company ceased operations in September 2000 amid charges by federal regulators that it was running a Ponzi-type scheme. The company allegedly invested pension and other funds in high-risk private placements and then covered up losses from these investments with new investment funds. Hundreds of union pension plans, trusts and private investors handed over more than $500 million to Capital Consultants for investment over three decades, according to the SEC. In a statement, Secretary of Labor Elaine Chao said the department is “is suing on behalf of these workers to recover as much as possible for the plans and to establish new procedures and controls to ensure that workers’ pension and health plans will not be raided again.” [email protected]

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