A major union pension fund must pay back hundreds of thousands of dollars to its member accounts following a Labor Department investigation.
The Machinists Union National Pension Fund must restore $200,000 to the plan and pay a $40,000 penalty in connection with an investigation into the fund’s investment decisions. The Labor Department "found that the National Pension Fund defendants violated the Employee Retirement Income Security Act and breached their fiduciary duties" for a slew of offenses including conflicts of interest and "spending and permitting others to spend fund assets lavishly on unnecessary trips, parties and extravagant food, wine and accommodations."
The fund provides defined benefit and defined contribution retirement accounts for the International Association of Machinists and Aerospace Workers, an AFL-CIO affiliate that represents about 570,000 workers.
The union fund spent more than $90,000 on two holiday parties for fund managers and a dinner with bottles of wine priced as high as $1,185, according to the Labor Department, which opened its investigation in January.
Fund trustees were accused of choosing costly and well-connected financial advisers like Graystone Consulting, which has close ties to union president Thomas Buffenbarger. It ignored the hiring recommendations of independent advisers and awarded the consulting firm a $900,000 contract, which was $125,000 more than the next most expensive bid.
"The Board discussed a personal relationship between IAM President R. Thomas Buffenbarger and J. Weldon Granger, who is the father of John Granger, the Graystone representative who manages the Fund's account," the Labor Department said in a complaint. "In hiring Graystone, the Trustees disregarded Fund procedures, ignored their specially hired consultant's prudent recommendation, chose Graystone even though it had not been recommended by their consultant, and paid Graystone's higher fees, without any prudent process or basis for doing so."
The union fund did not acknowledge guilt in the settlement, but will have to conduct a new search for investment advisers in light of the investigation. The settlement stipulates that Graystone can bid for the contract under a new selection process. Once the fund has fulfilled those terms the department "forever discharges" the "allegations in the complaint."
A fund spokesman declined a request for comment, directing the Washington Free Beacon to a press release issued in July. The fund trustees said that the decision to settle ultimately saved members money, although they still disputed the allegations of wrongdoing. The release touted the fund’s status, noting that it is "close to 100 percent funded, making it the healthiest of the healthy."
"The Trustees’ decision to accept the settlement agreement likely has saved the Fund many times the settlement amount in attorneys’ fees and litigation costs," fund director Ryk Tierney said in the release.
A Labor Department spokeswoman declined comment.