The Labor Department yesterday ended its 10-year lawsuit against the Central States pension fund of the Teamsters union in a settlement that will keep the once-scandal-ridden retirement fund out of the hands of the union well beyond the turn of the century.
George R. Salem, solicitor of labor, said the settlement assures that the nation's largest multiemployer pension fund "will remain clean." The fund -- which covers union members in the central, southeastern and southwestern areas of the nation -- has assets of approximately $8 billion.
Salem said the settlement should send "a very strong law enforcement message" to anyone involved in a pension fund.
Under the settlement, which was approved by the U.S. District Court in Chicago, operation of the pension fund and the appointment of its trustees will remain under court supervision until the year 2007.
In addition to the court supervision, to settle claims against the fund, the agreement requires restitution of nearly $4 million from the two companies that insured the former management and union fund trustees. Lloyds of London and Aetna Casualty and Surety Co. will have to pay $3.85 million.
And, $175,000 will come from the 18 former management and union trustees, including Teamster President Jackie Presser, under the terms of the settlement.
Salem said this was the first time the Labor Department has been able to win restitution from individual pension fund trustees since the enactment of Employe Retirement Income Security Act in the mid-1970s.
The settlement ends a legal battle that began in 1978. The Labor Department sued the Teamsters and the fund for making "imprudent" loans, including ones to gambling casinos in Las Vegas.
A fund official said that while the loans involved some "notorious borrowers," the trustees were never accused of fraud because the insurance policies had a clause that would have allowed the companies to void any claims if fraud were involved.
In 1982, the government reached a consent decree, which placed the fund under the control of an independent outside manager. A spokesman for the Central States fund said the agreement reached yesterday assures there will be no Teamster union involvement in the management of the retirement operation until 2007.
The Labor Department said the government has been able to recover a total of $21.5 million for the fund since 1982.
George W. Lehr, executive director of the fund, said that since the consent decree was signed in 1982 the net assets of the fund have grown from $3.7 billion to $8.7 billion.
John Climaco, Teamster general counsel, said in a court statement yesterday that the settlement proved the government's case against Presser wasn't "worth a plug nickel."