Carpenters union retirement plan participants sue over AllianzGI investments

Three United Brotherhood of Carpenters retirement plan participants have filed a class-action lawsuit against the plan’s board of trustees and its investment consultant, Callan, alleging breaches of fiduciary duties related to their investment in Allianz Global Investors funds.

The lawsuit, filed Aug. 2 in U.S. District Court in Seattle, alleges the board and Callan breached their duties under the Employee Retirement Income Security Act of 1974 by investing in Allianz Global Investors’ Structured Alpha enhanced-return strategies, the filing shows.

AllianzGI’s Structured Alpha strategies suffered catastrophic losses in early 2020. According to the filing, the board of trustees was invested in the AllianzGI Structured Alpha 1000 Plus and AllianzGI Structured Alpha U.S. Equity 250, and the portfolios, which make up nearly one-fifth of the retirement plans’ portfolios, lost 92% and 54%, respectively, of their values when the strategies collapsed.

An SEC investigation discovered what the agency called a “massive fraudulent scheme” perpetuated by the strategy’s three portfolio managers. AllianzGI agreed to pay more than $1 billion to settle the SEC charges and over $5 billion in restitution to investors who lost a total of $7 billion due to the collapse of Structured Alpha.

According to the court filing, the board filed suit against AllianzGI in November 2020, and Allianz settled the suit for $110 million in February, accounting for less than 45% of the plans’ losses in the investments.

Plaintiffs allege that because not all of the $250 million in losses have been recovered, they are seeking that the board and Callan “personally make good to the plans all losses incurred as a result of the breaches of fiduciary duties,” according to the filing.

AllianzGI agreed to sell most of its U.S. business to Voya Financial after its guilty plea activated an automatic 10-year disqualification from providing investment advisory services for U.S.-registered funds.

As of Dec. 31, 2020, the Carpenters Retirement Plan of Western Washington and the Carpenters of Western Washington Individual Account Pension Plan had $1.7 billion and $564 million, respectively, in assets, according to the Seattle-based plans’ most recent Form 5500 filings.

Officials at Northwest Carpenters Trusts, which administers the retirement plans; Callan spokeswoman Laura Dawson; Marie E. Casciari, shareholder at DeBofsky Law; Carl Engstrom and Mark Thomson, partners at Engstrom Lee McDonough Thomson & Thomson; Hajir Ardebili and Paul B. Derby, partners at Skiermont Derby, attorneys for the plaintiffs, could not be immediately reached for comment.

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