Nine trustees of the Canadian Commercial Workers Industry Pension Plan (CCWIPP) have been slapped with a total fine of $202,500 for a breaching their fiduciary duty, reports the Toronto Star.
Ontario Justice Beverly Brown imposed fines of $18,000 on each trustee, plus victim surcharges of $4,500 for breaches to the Pension Benefits Act (PBA).
The fine—the largest in Ontario’s history—could have been higher the Star reports had expert evidence been presented to support scores of other charges relating to specific investments. A money losing hotel in the Bahamas and a food processing plant in Idaho are just two examples of murky deals for which evidence of financial losses was not produced to the court, but ultimately contributed to the pension plan’s financial woes.
The trustees were convicted of exceeding the legal investment limits of 10% of the plan’s assets in one area as a result of investments or loans of nearly US$20 million to two firms run by a convicted pedophile, despite existing debts to the plan of $92 million.
CCWIPP records and other regulatory filings show that the plan invested more than $235 million in companies involved with RHK Capital and PRK Holdings, run by Ronald Hubert Kelly, a former Canadian priest-turned real estate mogul. According to a 2005 Financial Services Commission of Ontario (FSCO) report, Kelly launched a real estate holding company with CCWIPP funds in order to develop several properties in the Bahamas, at least two of which resulted in losses in the millions.
An additional $110 million of CCWIPP money was pumped into risky businesses including hotels, undeveloped land, a Florida-based restaurant chain and a hospitality firm that has since gone into receivership.
FSCO’s report found that the pension plan was in breach of the PBA on numerous fronts, including a lack of due diligence, exceeding regulatory investment limits and failing to disclose conflicts of interest.
As part of the sentencing, Judge Brown announced that the nine defendants were prohibited from using the plan’s assets to pay their fines or legal costs.
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