February 1, 2006
Court Date Set
Sheet Metal Workers sue Labour Sponsor Fund for $2M
A $2 million-dollar lawsuit launched by the Sheet Metal Workers Local 30 Pension and Welfare Fund over an unpaid redemption from a Labour Sponsor Fund goes to court next month.
The first-stage legal skirmish involves the SMW seeking a court ruling without trial of the facts to order Retrocom Growth Funds to pay the money. Retrocom is asking the court to dismiss the case saying the union pension fund knew or should have known the risks.
Joe McPhail, SMW pension and welfare fund chairman, told Daily Commercial News the SMW invested $1 million in the LSF a decade ago. Retrocom invested in bowling alleys, ice rinks, commercial and residential construction, resort condominiums, sports entertainment facilities and tourism sectors among others. Retrocom has been struggling since the Ontario government announced it would phase out the tax incentive scheme which offered up to 30 per cent in provincial and federal tax credits to investors. It had about $50 million under management with 21,000 shareholders.
In 2003, in accordance with the investment terms, the SMW notified Retrocom they wanted to redeem their shares, then worth about $956,780. The money hasn’t been repaid, says the union fund, and it is seeking an additional compensation of $1 million for damages, lost profits and breach of contract.
“It is a substantial amount of money but in terms of what the pension plan has invested, it will not adversely affect our members,” said McPhail. “At least it shouldn’t but we don’t know what the actual loss will be until we’re finished in court.”
He said the SMW Local 30 represents about 3,000 members across central Ontario and the fund is anxious to get the cash back to work, earning interest for those members.
“We’ve had other investments do quite well,” he said. “But the fact is we believe they owe us this money and we want it back.”
Retrocom admitted they have a liquidity problem and can’t pay back the redemptions being demanded by SMW and others who are bailing out of LSFs. Officials refused to comment on anything further.
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