Las Vegas Sun

 

 

Labor Dept. sues over union's failed Nevada investment

 

March 26, 2002

 

Losses from a failed Southern Nevada real estate project prompted the U.S. Labor Department to sue a Washington, D.C.-based investment management firm and its parent over their allegedly poor investment practices.

 

The Labor Department on Friday sued Trust Fund Advisors and its parent, Union Labor Life Insurance Co., in U.S. District Court in Washington D.C.

 

The lawsuit alleges the companies violated federal law by investing more than $10 million in assets obtained from the pension funds of the Laborers International Union in a risky North Las Vegas real estate project.

 

Beginning in 1995, TFA and ULLICO used pension fund assets to purchase and develop a 120-acre tract of raw land for a project called Sommerset Ridge. The development was abandoned in 1997 before any lots were sold.

 

The Labor Department said TFA and ULLICO failed to investigate the project's merits prior to its purchase. In 1999, the land was sold for $9.3 million to Capital Pacific Holdings, a Newport Beach, Calif.-based developer, resulting in losses to the pension funds of more than 37,000 partici- pants, the lawsuit said.

 

The Labor Department wants the court to require the defendants to reimburse the trust funds for all losses resulting from the North Las Vegas land sale, plus interest.

 

Ian Lanoff, an attorney representing the defendants, said, "It is our position that both (TLA and ULLICO) acted appropriately and prudently ... and that they will be completely vindicated."

 

A federal grand jury is also investigating the trading of ULLICO stock by union officials who sat on the company's board.

 

According to the Wall Street Journal, the company was an early investor in the bankrupt telecommunication company Global Crossing Ltd.

 

ULLICO's stock price often rose and fell in tandem with Global Crossing share prices, which led investigators to ask whether ULLICO board members rewrote repurchase and sales rules that allowed them to benefit from changes in stock value without offering the same opportunity to other shareholders, the Journal said.