Tuesday, November 30, 2010

Carpenter Boss D’Errico Admits Trustees Followed Bad Advice

D'Errico says he followed bad advice.
In a stunning admission, carpenter boss and last remaining benefit fund trustees from the corrupt Forde administration, Lawrence D’Errico, said the trustees followed bad advice given by professional actuaries who said there would be no negative impact on the "Officers Pension Plan" if the retirement age was dropped to fifty and allow for an "opt out" provision.

In 2004 the trustees voted to lower the retirement age to fifty and allow an "opt out" provision to the officers pension plan. This "opt out" provision allowed senior officers who paid the maximum amount into the pension plan to stop paying their employee share and instead put their contribution into their own annuity account for their own enrichment. The change had a profoundly negative impact on the financial health of the plan.

At the time of the change to the officers pension plan, Michael Forde was approaching fifty years of age and facing trial along with Martin Devereaux, in connection to their September 6, 2000 bribery case.

The two were convicted in that case in 2004, but a Manhattan Supreme Court justice tossed the conviction in 2005 because some jurors had read news accounts of the case. The pair was acquitted after a second trial in June 2008.

D’Errico who is also director of operations of the New York City District Council of Carpenters and president of local 157 made the stunning remark at the November 15, union meeting when asked a question about the status of the “Officers Pension Plan.”

D'Errico said the officers pension plan was “hit hard” by the stock market collapsed. Brother Mike Bilello asked, "did the decision of the trustees, to drop the retirement age to fifty and allow officers to opt out of the plan, contribute to the plans financial problems?"

With a smile on his face, D'Errico said, "the actuaries advised the trustees, and we rely on their judgment, they are the experts, they advised us there would be no negative impact on the financial health of the plan by dropping the retirement age to fifty and allow officers to "opt out" of the pension plan."

Brothers and sisters, that would be akin to a bank manager advising a home owner to take out several home equity loans without having a negative impact on the homes equity.

Even D'Errico could not keep a straight face with his answer. He is either very naive or completely incompetent if he really believed there would be no negative impact on the pension plan by lowering the age and allowing the "opt out" provision.

The fact is the trustees were appointed by corrupt ex-carpenter boss Michael Forde, and only hear what Forde wanted them to hear from the actuaries.

It's like when Forde wrote in the fall of 2008, that Judge Haight "complimented the officers of the council on their hard work fighting corruption," while he ignored everything else Haight had to say in his order.

Hear no evil, Speak no evil, See no evil.
The trustees are supposed to hold the assets in trust for the benefit of the plan members. They have professional advisers which they rely on, but they need sufficient knowledge to challenge that advice, which they did not.

The Employee Retirement Income Security Act of 1974 (ERISA) among other things, protects plan's assets by requiring that those persons who exercise discretionary control or authority over plan management or plan assets are subject to fiduciary responsibilities.

The primary responsibility of fiduciaries is to run the plan solely in the interest of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses. Fiduciaries must act prudently and must diversify the plan's investments in order to minimize the risk of large losses.

In other words, the trustees may not engage in transactions on behalf of the plan that benefit parties related to the plan, such as other fiduciaries, services providers, or the plan sponsor. Fiduciaries who do not follow these principles of conduct may be personally liable to restore any losses to the plan, or to restore any profits made through improper use of plan assets.

In the wake of Forde's 2009 indictment and revelations of massive corruption, concerns about the competence of union trustees has increased.

Forde, the drinking-and-drugging ex-boss of the carpenters union was sentenced last Friday in Manhattan federal court to 11 years in prison for his participation in a racketeering scheme that defrauded the union and its benefit funds out of millions of dollars.

Forde is one of ten defendants convicted in the case, and the second defendant to be sentenced.

Members have complained that the trustees abused their positions. “They approved changes to the “officers pension plan," they approved unauthorized use of union credit cards, all in an effort to allow the senior officers, such as Mike Forde, Pete Thomassen and Dennis Sheil to enrich themselves at the expense of the membership."

Last week the Daily News reported that district council trustee Michael Koballa, vice president of Dockbuilders Local 1456, was suspended without pay.

Koballa, whose duties included reviewing district council bills, ignored a key union officer's unauthorized use of union credit cards to run up whopping tabs for luxury hotel stays, gourmet meals and junkets, sources said.

On November 3, former district council employees, John Cavalli, Anthony Rugolo and Fred Kennedy filed an amended complaint against the District Council, et,al., alleging, inter alia, that the officers "mismanaged and misappropriated the Union and Pension Funds to the detriment of its members in multiple violations of ERISA and other labor laws.”

7 comments:

  1. El Arwrence would not be smiling if the membership decided to sue him for his actions or lack thereof. Despite what they think and what they try to tell the membership they are personally legally liable and can be sued. Each trustee has a fiduciary duty and duty of due diligence.They cannot pass the blame to the actuary's or anybody else. Each Trustee is bonded. In the case of the Empire Trustees it is 2 million each x 26 Trustees for the funds to recover.

    At a recent meeting in Albany David Stewart Empire Fund manager who was second behind Fund Chairman Joesph Oliveri and now second behind Dale Stuhlmiller(sp)did a questions and answer meeting.He told the rank and file that the Trustees were fired from the Empire funds on the advice of legal counsel. They were told they needed to do it so they could sue them at a later date for breech of Fiduciary Duty and Due Diligence.

    It seems now with Forde and the other criminals convictions that the decisions of the Trustee was motivated by greed and that they clearly and willfully violated their due diligence and fiduciary duty. INCLUDING Larry. I am surprised no one has filed suit as of yet. I would bet that would take the smile off Larrys face. If he was found guilty how would that affect his ability to be bonded.Hint.How many Council Offices,Trustee positions or Local Offices require bonding to hold.

    ReplyDelete
  2. Maybe they set up a payment plan just like for employers here in NYC. Bonds are essentially non existant as to agreements where employers do not have the cash and are permitted the option. Why do I say this ? Benefits which are scoffed when they split the job. Look at the 3-400+ ERISA suits in SDNY. How much does that cost, come too many years 3-5 later. Bonds are for rapid settlement. Bonds are fading away here. THEY DESERVE EACH & EVERY (law) SUIT THEY'LL HAVE TO WEAR, EVEN THE STRIPPED ONES !

    ReplyDelete
  3. Maybe we,the carpenters, should ASSET all their pensions with a 1% Plan that makes them give up everything in their pension plans.
    ps-the 1% is more like 5% but don't tell them.

    ReplyDelete
  4. Dont believe or rely on anything coming out of NYCDCC because if you do you most always are dissapointed.They are the poster child for a criminal orginization & anything short of total prosecution would be a sham.The feds need to continue their pursuit of all past and ongoing criminal behavior.Prosecution has been hard to come by but half measures avail us nothing.Time to clean this mess up once and for all!

    ReplyDelete
  5. Union Officials: Guidelines for Fiduciary Responsibilities Under Section 501 of the Labor-Management Reporting and Disclosure Act, 29 U.S.C. 501

    http://www.federalregister.gov/articles/2005/08/29/05-16908/union-officials-guidelines-for-fiduciary-responsibilities-under-section-501-of-the-labormanagement

    ReplyDelete
  6. Before they made the changes The Segel Group was the actuarians and the recommended against the changes. They were fired by the trustees and replaced with a company that told them what they wanted to here

    ReplyDelete
  7. Lawrence is not the only trustee left from Forde. Charlie Harkin is still there and he was one of the trustees that opted out and directed the money into his annuity.

    ReplyDelete

I would ask that if you would like to leave a comment that you think of Local 157 Blogspot as your online meeting hall and that you wouldn’t say anything on this site that you wouldn’t, say at a union meeting. Constructive criticism is welcome, as we all benefit from such advice. Obnoxious comments are not welcome.