BDN recently learned of a contentious situation between the Sheet Metal Workers International Association (SMART) and the WSRCC Union. SMART has been distributing flyers to carpenters on various job sites suggesting that Carpenters Union leadership has raised dues and is diverting pension funds towards wages without member consent. The handbill suggests members ask leadership, "where's my extra dues going?"
The implication is that this reallocation of funds will drain pension benefits. This is a matter of great concern in an era where pension systems are regularly under attack- prompting BDN to investigate.
It has been revealed that there is much more to the story. Based on BDN investigations the SMART Union flier is an attempt to damage the reputation of the Carpenters Union with whom SMART has had a contentious relationship for years. A review of SMART social media shows a constant anti-Carpenter narrative, and while Carpenter Union social media makes no mention of SMART, it is clear that the two Unions are consistently at odds. But beyond a simple story of union rivalries, the issues surrounding the Carpenter's pension paint a deeper picture of duplicity, incompetence, and obstruction – with the real players at the center of it all appearing to be the Associated General Contractors of America- an association of contractors that regularly opposes working class policies.
Getting to the Bottom of It
In 2020, the Northwest Pension fund lost over approximately $250 million, the Northwest Regional Council of Carpenters and the Southwest Regional Council of Carpenters recently merged to form the Western States Regional Council of Carpenters. BDN spoke with Miguel Perry, a retired Carpenters Union representative regarding the merger and consequent developments.
"The Southwest region boasted a much more financially stable pension plan, prompting the Northwest Union to transition members to this plan. It's a slam dunk. It offers significantly higher benefits at a fraction of the cost—up to a 312% increase in the pension value for almost half the expense. After what happened in 2020, a strategy is on the table to benefit Northwest Union Carpenters, yet the AGC’s Washington Labor director is holding up the reallocation of pension funds.“
Perry's claim does raise some red flags as these numbers would normally be improbable. How could one pension fund purportedly provide much greater value than another while costing so much less? Delving into the respective organization's recent histories revealed a significant negative event (and a consistent under-perfomance by the Northwest Carpenters' pension) in 2020 which would chart the course toward these developments. The Northwest Carpenter’s Pension initially lost approximately $250 million- or 19% of the trust value due to a risky investment in Allianz hedge funds.
The market crash in March of 2020 exposed an extensively fraudulent scheme that served to conceal the downside risks of a complex options trading strategy Allianz called “Structured Alpha.” Allianz Global International US (AGI US) marketed and sold the scheme to institutional investors, including pension funds for teachers, clergy, bus drivers, engineers, and the Northwest Carpenters. Three years ago, the strategy lost billions of dollars as a result of AGI US and portfolio managers’ misconduct.
BDN was able to speak to current trustee on the NW trust Pedro Espinoza who has been part of the attempts to clean up the Allianz scandal. "It was too good to be true and someone should have questioned the safeguards. A horrible investment and a horrible miscalculation" says Espinoza. He questioned whether any of the management trustees even understood the risky investments they poured millions into or whether the Trust office was properly functioning. “The Trust was so poorly managed that the Trustee’s insurance premiums did not get paid. How do you let someone manage that much money when they themselves can’t even get a check in the mail? It was a mess.”
The back and forth between Allianz and investors including the Northwest Carpenters concerns the transparency of the pension investments. Lawsuits brought against the insurance giant revealed that managers of Structured Alpha lapsed in their fiduciary duties and failed to maintain a safe investment strategy that would guard against losses of this magnitude. Ultimately, the SEC launched an investigation, courts agreed with plaintiffs, but the NW Carpenters only recovered over $140 million in settlement after paying tens of millions to attorneys. The remaining $110 million in losses remain uncollected meaning the participants suffer.
Fingers pointed squarely at the management trustees who allowed such an investment to occur. All the Union employees who served on the trust at the time have since resigned or been removed amidst all of the controversy and loss. The same goes for the other side of the coin where almost all the management trustees are no longer involved- all but one.
Andrew Ledbetter is the lead AGC- appointed management trustee. He was a trustee at the time of the downturn. Despite standing out as a highly questionable player in the Allianz debacle, Ledbetter remains the only management trustee who was serving at the time of the Allianz losses. His background and education cannot explain why he remains a trustee overseeing billions of dollars of the carpenterrs' pensions. In 2012, Ledbetter graduated with a degree in Occupational Safety and Health Management, His career began with the Associated General Contractors of America in a safety role which evolved into him working in the human resources department. In 2018, with just six years of post-college work experience and no clear financial or labor background, the AGC appointed him to the Northwest Pension Trust, managing at the time over a billion in assets.
By 2020, Ledbetter had been in the role for two years and would have had to vote to continue ill-fated risky hedge fund investments multiple times. The question is: why appoint someone with limited experience to oversee billion-dollar trust funds responsible for workers' pensions? The apparent indifference of the AGC, with a history of anti-organized labor activism, makes one question the AGC's financial decisions.
Where's the Motive
Now, Ledbetter is actively holding up the reallocation of pension contributions to the Southwest plan despite fiduciary studies demonstrating the immense and immediate benefits for the participants. Given the AGC's history of opposing labor-friendly initiatives, including minimum wage increases and prevailing wage ordinances, the question remains: why does the AGC continue to hold a seat on funds dedicated to supporting workers' pensions when they appear to oppose unions in every other form.
While other trustees involved in the Allianz debacle had resigned or been removed, Ledbetter remains on the fund. Anonymous sources from the AGC tell BDN that the lack of qualified candidates willing to assume the stress of a trustee position was the reason for retaining Ledbetter, "Everyone looks at everyone else and Andrew was the only one to raise his hand again." This underscores AGC's indifference to safeguarding the health of union pension funds.
The investigation into SMART Union's claims reveals a web of poor financial decisions and raises concerns about the transparency and competence of those who are entrusted with managing the ongoing financial well-being of union members.
“Let’s look at this from a different perspective and talk about how much could have been gained during the period from 2020 until now if those funds had still been a part of the pension's investments. $250 million got erased by poor fund management and lack of safeguards. Funds that could have been in the account growing during the COVID recovery period when the stock market boomed. I believe that the loss potential is the real economic damage that has been done, far more than $250 million, said Espinosa.
"We’re doing the right thing,” said Perry. “The merger, or reallocation will increase Pension benefits for our members for less cost. That handbill is misleading and simply a ploy by the SMART Union to disenfranchise our carpenters. Organizations like SMART, and the AGC with their nonunion partners, don't like what we have and are constantly doing anything in their power to take away what we have earned. The AGC has basically told us 'you get what you get and don’t throw a fit,' but we aren’t children putting together our first erector set. We build America day after day, building our homes, our communities, and transforming our skylines. We’ll get what we have earned, but it is on us to go get it.”