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Firm charged with $25M in pension losses

By Lisa Shidler

April 11, 2008 12:45 pm ET

The U.S. Department of Labor today sued Chicago-based AA Capital Partners Inc., an investment advisory service, and its executives, accusing them of improperly causing more than $25 million in losses for five Michigan pension funds.

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The Labor Department alleges that the company and its executives misused plan assets to benefit themselves and charged the plans excessive investment-management fees.

“This case involves gross abuse of the trust that workers and their families placed in the management of these pension funds,” said Labor Secretary Elaine L. Chao in a statement.

“We are seeking full restitution to the pension plans, including the illegal profits that the defendants realized at the expense of workers and their families.”

The suit alleges that AA Capital Partners, its co-owner and president John Orecchio, chief financial officer Mary Elizabeth Stevens and affiliate AA Capital Liquidity Management LLC violated the Employee Retirement Income Security Act of 1974 by misusing plan assets and charging the plans excessive fees on investments.

From 2002 to 2006, the defendants used $25.9 million of the plans’ assets to pay for the operating expenses of the firm, renovations to a horse farm and the costs of a strip club managed by Mr. Orecchio, the DOL alleges.

The pension plans covered more than 60,000 participants of the Carpenters Pension Trust Fund of Detroit and Vicinity, Operating Engineers Local Number 324 Pension Fund, Michigan Regional Council of Carpenters Annuity Fund, Millwrights’ Local Number 1102 Supplemental Pension Fund and Michigan Teamsters Joint Council #43 Pension Fund.

As of April 30, 2006, the pension plans had about $3.1 billion in total assets (the latest data available).

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