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        Fraud Puts Union Pension Funds at Risk

        150 150 Clifford Horwitz

        Union Pension Funds and Fraud

        Corporate Misconduct and Fraud

        Union pension funds have continued to suffer unnecessary losses due to corporate fraud and mismanagement. 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.

        Recover Limited

        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.

        Managing Partner and Lead Trial Attorney, Cliff Horwitz, welcomes your comments on this article and can be reached at (800)-985-1819.

        Clifford Horwitz

        Clifford Horwitz

        As Principal Partner and lead trial lawyer of Horwitz, Horwitz & Associates, Cliff has devoted his entire career to achieving justice for those who have been victimized by corporate negligence. He has won numerous record-setting jury verdicts and settlements, as well as what was the largest personal injury verdict in Illinois for an individual.

        All stories by: Clifford Horwitz