DOL: Investment Firm's Fund Misuse Leads to $25 Million in Losses

The U.S. Department of Labor has filed suit against Chicago-based AA Capital Partners Inc. and its executives for what Secretary of Labor Elaine Chao described as "gross abuse of the trust that workers and their families placed in the management of these pension funds."

DOL's suit (Chao v. AA Capital Partners Inc., Civil Action Number 1:08-cv-2029) alleges that AA Capital Partners, its co-owner and president John Orecchio, chief financial officer Mary Elizabeth Stevens, and affiliate AA Capital Liquidity Management LLC violated the Employee Retirement Income Security Act (ERISA) by imprudently misusing plan assets and charging the plans excessive fees on investments, causing loses of more than $25 million for five Michigan pension funds.

The suit seeks to restore all losses incurred by the plans as a result of the defendants' improper actions. "We are seeking full restitution to the pension plans, including the illegal profits that the defendants realized at the expense of workers and their families," Chao said.

The pension plans covered more than 60,000 participants of the Carpenters Pension Trust Fund of Detroit and Vicinity, Operating Engineers Local Number 324 Pension Fund, Michigan Regional Council of Carpenters Annuity Fund, Millwrights' Local Number 1102 Supplemental Pension Fund, and Michigan Teamsters Joint Council #43 Pension Fund. As of April 30, 2006, the pension plans had total assets of approximately $3.1 billion, the latest data available.

At various times from 2002 to 2006, the defendants are alleged to have improperly used $25.9 million of the plans' assets to pay for, among other things, the operating expenses of the firm, renovations to a horse farm, and a strip club managed by Orecchio.

In addition, they allegedly caused the plans to pay unauthorized fees to AA Capital Partners. The suit seeks a court order to require that the defendants restore to the plans all losses, return illegal profits, and correct transactions prohibited by law. The suit also asks that the defendants be permanently barred from serving as fiduciaries to any plan governed by ERISA in the future.

AA Capital Partners is a registered investment advisory firm to employee benefit plans, including ERISA-covered benefit plans. The firm created AA Capital Liquidity Management as the general partner for a fund that invested in real estate loans and entities that developed real property. As a result of a Sept. 13, 2006, lawsuit filed by the Securities and Exchange Commission, AA Capital Partners was placed in the hands of a court-appointed receiver.

Download Center

  • Safety Metrics Guide

    Is your company leveraging its safety data and analytics to maintain a safe workplace? With so much data available, where do you start? This downloadable guide will give you insight on helpful key performance indicators (KPIs) you should track for your safety program.

  • Job Hazard Analysis Guide

    This guide includes details on how to conduct a thorough Job Hazard Analysis, and it's based directly on an OSHA publication for conducting JHAs. Learn how to identify potential hazards associated with each task of a job and set controls to mitigate hazard risks.

  • A Guide to Practicing “New Safety”

    Learn from safety professionals from around the world as they share their perspectives on various “new views” of safety, including Safety Differently, Safety-II, No Safety, Human and Organizational Performance (HOP), Resilience Engineering, and more in this helpful guide.

  • Lone Worker Safety Guide

    As organizations digitalize and remote operations become more commonplace, the number of lone workers is on the rise. These employees are at increased risk for unaddressed workplace accidents or emergencies. This guide was created to help employers better understand common lone worker risks and solutions for lone worker risk mitigation and incident prevention.

  • EHS Software Buyer's Guide

    Learn the keys to staying organized, staying sharp, and staying one step ahead on all things safety. This buyer’s guide is designed for you to use in your search for the safety management solution that best suits your company’s needs.

  • Vector Solutions

Featured Whitepaper

OH&S Digital Edition

  • OHS Magazine Digital Edition - July August 2022

    July / August 2022

    Featuring:

    • CONFINED SPACES
      Specific PPE is Needed for Entry and Exit
    • HAZARD COMMUNICATION
      Three Quick Steps to Better HazCom Training
    • GAS DETECTION
      Building a Chemical Emergency Toolkit
    • RESPIRATORY PROTECTION
      The Last Line of Defense
    View This Issue