Stephen J Govoni
What do you do when the newspapers point
out that one of your union's local pension boards have approved
multi-million dollar fraudulent real estate deals? If you are
Arthur Coia, president of the 500,000 member Laborers International
Union of North America, you find someone from the private sector
to develop investment policies, work out a corporate governance
policy, and identify viable economically targeted projects.
Last June, Coia hired Chuck Agles, formerly
senior vice president for retail banking with Detroit-based Comerica
Bank, as director of investments. The 51-year-old executive's
task: to be a resource that helps 110 widely dispersed Laborers
locals, with some $15 billion in total pension assets, better
manage their portfolios.
Some of those assets have been notoriously
ill-managed. In 1990, for example, the Mason Tenders District
Council of New York, a regional which runs the pensions of ten
Laborers locals, loaned a member of the Genovese crime family
$15.85 million to buy a building on West 18th Street in Manhattan
for $7.45 million. Nine months later, the Laborers fund allegedly
purchased that same building for $24 million-all in the middle
of the worst downturn in New York real estate since the 1960s.
Following an investigative series in New
York Newsday, three union officials and two reputed mobsters were
indicted in September 1992 on racketeering charges that included
embezzling millions in crooked real estate deals. Frank Lupo,
former president of the Mason Tenders District Council of New
York, pled guilty in the case.
While criminal charges are still pending
against several defendants in the Laborers case, Agles is establishing
underwriting guidelines for real estate projects. Guidelines are
also in the works for investments that would create jobs for union
members-an avenue the union is determined to pursue. Agles is
quick to note that Laborers plan participants would expect returns
of 10% to 12%. "If they're not bankable projects, we can't
do them," he says emphatically.
In fact, returns have averaged in the low
double-digits in recent years on the bulk of the Laborers funds,
which are in a fairly conventional mix of equity and fixed income
securities, Agles says. Agles' authority is limited to advising trustees
and packaging investment ideas. "I'm not going to say they'll
eliminate the criminal stuff," he notes. "But we should
be able to avoid some of the locals getting into investments that
don't seem prudent." His advice and attention are having some
effect. Agles helped one local avoid a chancy ETI-related project,
a proposed $500 million industrial park in southern Illinois.
The developer was looking for an $8 million infrastructure loan
from the Laborers, but Agles was skeptical. "The developer
had not outlined the plan very well. So I stepped away from it,"
Agles has also set up a database to track
equity and fixed income investments for all of these funds, and
eventually, to coordinate proxy voting activities. This, he believes,
will give the Laborers a more powerful voice in corporate governance
"This system will be looked at by a
lot of union pension funds, because it enables them to gather
at a glance what their portfolios look like," Agles predicts.
For a union fund that until recently received attention only of
the unpleasant kind, that should come as a relief.
Copyright © 1998 Asset International, Inc. All rights reserved. Plan Sponsor February 1994.