Friday, July 14, 2006

Canadian Company Pension Idiocy

TheStar.com - Trustees charged in pension case


Trustees charged in pension case
Ontario says $225 million mismanaged
Union plan denies watchdog's claims
Jun. 29, 2006. 06:52 AM
TONY VAN ALPHEN
BUSINESS REPORTER


Trustees of Canada's biggest multi-employer union pension plan face regulatory charges that they mismanaged more than $225 million in worker funds, including investments in money-losing Caribbean resorts.

The Financial Services Commission of Ontario said yesterday it has laid 15 charges against trustees of the Canadian Commercial Workers Industry Pension Plan for alleged breaches of the Pension Benefits Act relating to numerous major investments over a two-year period.

The commission accused eight current and two former trustees of "failing to exercise the care, diligence and skill in the administration and investment of the pension fund ... that a person of ordinary prudence would exercise in dealing with the property of another person."

Some charges relate to decisions by plan trustees to invest about $166 million in real estate companies and Caribbean developments under the control of a defrocked priest.

The commission also said trustees violated pension law by investing more than 10 per cent of the plan's assets with one or two associated persons or affiliated companies when it provided extensive funds to the former priest's firms.

But officials of the pension plan, which provides benefits to 310,000 current and former members of the United Food and Commercial Workers union, denied that it broke any pension laws.

"The charges are regulatory and not criminal, and are being vigorously defended by the trustees," the plan said in a statement.

Under the pension act, a trustee could face a maximum fine of $100,000 on conviction of each charge. The act has no provisions for the removal of trustees.

Commission officials would not comment on the importance of the case but it is one of its biggest pension plan probes in terms of the size of investments under review in recent years.

"It's serious," said commission spokesperson Rowena McDougall. "The superintendent (Bob Christie) is of the opinion that there is sufficient evidence to proceed with charges."

The commission did not reveal the dollar value of investments relating to the charges but it is more than $225 million, according to details in an earlier report on the plan by the regulator.

The defendants or their legal representatives are scheduled to make their first appearance at Old City Hall court July 26.

They include Cliff Evans, the plan's founder and retired leader of the food union. He resigned as a trustee last November but said it had nothing to do with a probe by the regulator.

Evans was the head of a special committee that approved the investments that attracted the attention of the commission more than three years ago.

The commission, which regulates the pension, insurance and loan industries, also charged trustees Wayne Hanley, the union's current national president; Michael Fraser, his predecessor; Tony Filato, Local 500 secretary treasurer, and Bernard Christophe, the plan's chairman and former Local 832 president.

On the employer side of the plan, the commission named trustees Gord Cannady, former vice-president of human resources at Canada Safeway; Lucy Paglione, vice-president of pensions and benefits at Loblaw Cos.; Alain Picard, vice-president of human resources for Metro Richelieu; Tom Zakrzewski; vice-president of labour relations at the Great Atlantic and Pacific Co., and Howard Preston, a former representative for small companies, as defendants.

In its statement, pension plan officials noted the commission found no evidence to support allegations that trustees benefited personally, received improper payments or committed fraud.

"They (trustees) have always acted in the best interests of the plan and its members," plan officials added.
The Toronto Star reported almost a year ago that the pension plan, which has $1.4 billion in assets, had poured more than $280 million into questionable investments during the past decade.

The investments involved loans for the two big Bahamian resort ventures, a Toronto hospitality services firm, a potato processing plant in Idaho, a Hamilton inn, a shrimp factory in Newfoundland, a meat packing operation in Kitchener, a magic theme restaurant chain in Florida, a financial company investing in small stocks and a former California Internet provider that once advanced money to litigants.

The resorts have struggled while most of the other investments collapsed.

A stinging commission report in May 2005, obtained by the Toronto Star, revealed sloppy bookkeeping, a lack of investment homework and weak monitoring of investments by the plan.

The report and an update earlier this year followed a complaint from a union member.

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