Bureau Of National Affairs
Thursday, March 1, 2001
Bureau Of National Affairs
Former Laborers Leader in Oregon
Pleads Guilty to Investment Firm Payoffs
PORTLAND, Ore.--A former business manager for the Laborers' International Union Feb. 26 pleaded guilty to criminal charges of receiving payoffs from the owner of an investment company that managed a share of the union's pension funds (United States v. Abbott, D. Or., No. CR01-70BR, plea entered 2/26/01).
The guilty plea is the latest development in the unfolding story of allegations that a Portland investment management company misused union trust funds (213 DLR A-4, 11/2/00). The Department of Labor and other federal regulators placed Capital Consultants LLC under receivership last year (18 DLR A-3, 9/27/00). An estimated three-fourths of the $927 million under Capital's management was union pension plans, including Taft-Hartley plans covering pension, health and welfare, and vacation benefits.
Civil lawsuits have been filed by the Labor Department, the Securities & Exchange Commission, and union trusts against Capital. Members of some unions have filed actions against their own pension fund trustees. In addition, federal agencies are investigating criminal charges against capital's principal owner, Jeffrey Grayson, and others.
The instant case concerned John D. Abbott, who was business manager of the Oregon, Southern Idaho, and Wyoming District Council of Laborers until his resignation late in 1998. While in that leadership position, he was a trustee of a number of the council's pension plans, as well as a health and welfare plan and a vacation plan, according to court documents.
A significant portion of the union's funds were invested and managed by Capital during those years. It is not clear exactly how much of the Laborers' pension money was sent to Capital to manage. In one of the civil lawsuits filed by some LIUNA members against the plans' trustees, the plaintiffs allege losses of $25 million (198 DLR A-2, 10/12/00).
Abbott pleaded guilty to accepting gratuities in cash and other consideration of $194,940 from Grayson in exchange for helping place pension funds with Capital. Capital provided investment services for the plans for an annual fee of between 2 percent and 3 percent of the principal invested. Abbott pleaded guilty to racketeering charges under Title 18 U.S.C. § 1954.
"As a trustee for several Oregon and one Idaho Laborers Union Pension plans, I received money from Jeffrey Grayson as gratuities intended to influence actions from me respecting access to the funds of the plans in favor of Capital Consultants and Mr. Grayson," Abbott said in his signed plea.
At the plea hearing, assistant U.S. Attorney Lance Caldwell told the court he had witnesses who could testify that prior to some of Abbott's visits to Grayson, Capital employees would be sent to the bank with checks for large amounts of cash. The cash was delivered to Grayson's office and placed in a basket in his wheelchair, as he is disabled. When Abbott emerged from Grayson's office, witnesses said they saw bulges in his pockets that appeared to be bundles of cash, Caldwell said.
In addition, Abbott pleaded guilty to understating his 1997 income on his federal tax return by $76,560 in gratuities received from Grayson.
Abbott agreed to cooperate with federal authorities in their investigation of Grayson, according to court documents. In exchange, the U.S. attorney's office agreed to reduce the severity of the charges against the 55-year-old Abbott, according to court documents. Each of the two counts to which Abbott pleaded guilty carries a maximum three-year prison sentence, plus a $250,000 fine. The U. S. attorney's office will recommend a 15-month sentence, although the judge has final authority over sentencing.
The agreement also bans Abbott from working or consulting for a labor organization or employee benefits plan for at least 13 years.
Abbott's attorney, Forrest Rieke, could not be reached for comment.