UA's Maddaloni and Patchell among trustees ordered to pay nearly $11 million; DOL found fund mismanagement at Diplomat Resort

The Department of Labor removed four board trustees from the Plumbers and Pipefitters National Pension Fund and ordered them to pay $10.98 million in restitution and civil penalties stemming from the improper management of the fund's investment in the Westin Diplomat Resort and Spa in Hollywood, Fla.

The settlement of the nearly 2-year-old lawsuit, which must still be approved by the federal district court in Ft. Lauderdale, Fla., calls for the resignation from the fund's board of Martin J. Maddaloni, president of the United Association of Journeymen and Apprentices of the Plumbing, Pipefitting, Sprinkler Fitting Industry of the United States and Canada; Thomas Patchell, general secretary-treasurer of the plumbers' union; Charles H. Carlson, former chairman of Industrial Piping Co.; and James A. House, part owner of bankrupt refrigerant company J.A. House Inc.

"The plumbers' trustees mismanaged the investment and placed the retirement benefits of thousands of union workers at risk," said Labor Secretary Elaine L. Chao.

Lawyers representing Maddaloni and Patchell stated, "We find it inappropriate and regrettable that the U.S. Department of Labor would issue a misleading press release regarding a matter which is before a court for consideration," but did not elaborate on which aspects were misleading, according to the Engineering News-Record.

The UA pension fund bought the original dilapidated Diplomat Hotel in September 1997 for $40 million with plans to restore it, said the South Florida Sun Sentinel. The 39-story, 998-room resort was scheduled to open January 2000. It opened 18 months late at a cost of $800 million, twice the original budget of $400 million.

Many union members were concerned about their retirement benefits once word of the many delays and increased costs came out.

In September 2002, the DOL sued the trustees for "imprudent management," violation of the Employee Retirement Income Security Act, failure to control construction costs and payment of excessive fees to service providers.

Maddaloni and Patchell also have resigned their positions with six other ERISA-covered plans where they served as fiduciaries.