Fraud Puts Union Pension Funds at Risk
Union pension funds have continued to suffer unnecessary losses due to corporate fraud and mismanagement. HH&P assists group investors and union pension fund trustees through its no-cost monitoring service by providing early discovery of mismanagement, fraud and/or corporate abuse.
The Securities and Exchange Commission (SEC), whose job it is to monitor publicly traded companies and, when necessary, prosecute actions for fraud, has proven less than effective at being able to recover maximum losses on behalf of defrauded investors, including pension funds, in public companies and deter future fraud. For example:
• Birmingham Amalgamated Transit Authority Local 725, a union pension fund and the Old Dominion Disability and Retirement Allowance Plan, a pension plan for transit workers were two of three funds that lost a combined total of $56 million due to corporate misconduct and fraud; and
• 400 GRTC Transit System workers were affected when the value of its pension fund dropped $7.3 million over 16 months due to corporate mismanagement and fraud.
While the SEC has had some success at being able to recover losses on behalf of union pension funds, recovery by the SEC is limited in three very significant ways:
1) First, the SEC often takes into account the effect of a penalty on the company, itself, and in some cases, where the imposition of penalties would bankrupt the company, the SEC may reduce or dismiss financial penalties altogether. As a result, investors may recover little or no compensation;
2) Second, a portion (often more than 50%) of any penalty recovered by the SEC goes directly to the U.S. Treasury Department, leaving fewer funds available to compensate investors; and
3) Third, SEC investigations are almost always conducted in private, which can potentially lead to a greater loss in monies due to delayed knowledge of a company’s wrongdoing.
In light of these obstacles, union pension fund members may not be able to maximize recovery through lawsuits initiated by the SEC.
The Case for Private Monitoring and Shareholder Class Action
Private portfolio monitoring and private shareholder class actions, however, do not present the same obstacles as those associated with suits brought by the SEC.
Through private portfolio monitoring, a union pension fund has the ability to pro-actively monitor against loss and investigate potential corporate wrongdoing. Unlike an SEC investigation, which leaves investors in the dark until the investigation has significantly progressed, a union’s private investigation may bring the wrongful conduct to light in a timely fashion. Once wrongdoing is discovered, a union pension fund and its members can react accordingly, sometimes pursuing recovery of losses through a private litigation.
Private portfolio monitoring and the pursuit of recovery through private litigation allows a union’s pension fund trustee to fulfill its fiduciary duties. In particular, a trustee has a responsibility to investigate corporate wrongdoing and take further action in order to protect member investors against losses. Failure to do so may constitute a breach of such responsibility and may expose the union to costly and unnecessary liability.
Working with a union’s current general counsel, Horwitz, Horwitz & Paradis (HH&P) (a sister firm of the Chicago personal injury law firm of Horwitz, Horwitz & Associates, Ltd) offers complementary, no-cost portfolio monitoring services.
Managing partner for Horwitz, Horwitz & Associates, Ltd., Cliff Horwitz, is pleased to make the monitoring service available free of cost to union trustees. “The rate of which these crimes are coming to light is reflective of an industry that has failed investors, costing members their life savings when they will need it the most. The SEC has been slow to respond …or to respond effectively in a manner that enables adequate recovery for union member investors.”
HH&P assists group investors and union pension fund trustees through its no-cost monitoring service by providing early discovery of mismanagement, fraud and/or corporate abuse.
Through careful monitoring, HH&P investigators and attorneys detail a fund’s loss (or potential loss) and explain the potential corporate fraud or misconduct to union trustees, outlining potential options for recovery on behalf of member investors.
With over 40 years of experience protecting investors against securities fraud and corporate misconduct, HH&P attorneys have been appointed lead or co-lead counsel in numerous securities fraud actions in courts across the United States, recovering billions of dollars on behalf of investors and aggrieved parties.
The success of the attorneys of HH&P’s in prosecuting large, complex litigation in the fields of securities and consumer protection is demonstrated by the significant results the Firm has achieved for its clients.
If the trustee of a union fund chooses to prosecute a claim or participate as part of a class action, HH&P attorneys, in-house investigators and forensic accountants will work on a contingency fee basis to recover losses incurred by the union. Therefore, there is no fee for HH&P’s services unless the case is successfully resolved.
Union trustees now have a valuable tool that can help protect against liability and recover member investor pension fund losses.
For more information on HH&P’s services, contact attorney Paul Paradis at Horwitz, Horwitz & Paradis at 212-404-2221, or Cliff Horwitz, at 312-564-7442.
Managing Partner and Lead Trial Attorney, Cliff Horwitz, welcomes your comments on this article and can be reached at (312) 564-7442, or by email: office@horwitzlaw.com.