Following a settlement reached by the parties, the United States District Court for the District of Columbia has dismissed the U.S. Department of Labour’s lawsuit against the International Association of Machinists’ national pension fund.
The country’s fifth-largest multi-employer pension fund and its trustees were facing accusations of violating the Employee Retirement Income Security Act.
A complaint filed by Labour Secretary Thomas Perez alleged the trustees had participated in the “imprudent hiring” of an investment consultant for the fund. According to the complaint, the trustees insisted on hiring the firm, despite numerous reviews and expressed disapproval from the fund’s chief investment officer indicating that it was a poor choice and even as the board was aware that fund president Thomas Buffenbarger had a personal relationship with one of its representatives.
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The complaint also alleged the trustees threw “unnecessary, lavish” parties and took trips for board meetings that included dinners with service providers and fund staff as well as two holiday parties that the fund paid US$90,000 for. None of the allegations have been proven in court.
The parties have since reached a settlement agreement that ordered the defendants to repay US$200,000 to the fund as well as pay US$40,000 in civil penalties.
The order also required the trustees to adopt new policies for manager and consultant selection and amend the fund’s code of conduct and ethics and its record retention policy to prevent the situation from occurring in the future. Furthermore, it must hire a new general investment consultant through an independent search consultant.
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In a press release from the International Association of Machinists’ national pension fund, the group said it was “inexplicable” that the Department of Labour would bring a lawsuit against a “flourishing plan” that’s close to 100 per cent funded.
“The Trustees’ decision to accept the settlement agreement likely has saved the fund many times the settlement amount in attorneys’ fees and litigation costs,” said Ryk Tierney, director of the pension fund. “Now, the trustees can get back to focusing exclusively on the task at hand — making sure the fund remains one of the healthiest and best funded pension plans in the United States.”
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