Monday, 15 July 2024

Konocti Harbor at center of federal lawsuit

 

That case is due to come to trial this spring.


In November 2004, the U.S. Department of Labor sued current and former trustees, the plan administrator and Local 38 of the United Association of Plumbers, Pipefitters and Journeymen for diverting more than $36 million in assets of five employee benefit plans to renovate and operate Konocti Harbor Resort and Spa.


The lawsuit, filed in San Francisco, alleges that trustees, including Lawrence J. Mazzola, business manager and financial secretary-treasurer of Local 38 since 1980 and son of Joe Mazzola, for whom the resort's indoor showroom is named violated the Employee Retirement Income Security (ERISA).


Local 38 controls the UA Local Convalescent Fund, which has owned Konocti Harbor since 1959.


The suit alleges that Local 38 used retirement, health, scholarship, apprenticeship, and vacation and holiday funds for more than 2,000 participants employed throughout Northern California to renovate Konocti Harbor.


In particular, the suit alleges that Mazzola and plan administrator Frank Sullivan diverted approximately one-third of all pension assets more than $36 million to the convalescent fund.


In turn, some or all of the diverted assets were allegedly used to build and improve Konocti's 5,000-seat outdoor amphitheater, 1,000-seat concert hall and other infrastructure.


The Labor Department suit alleges that the current and former trustees and the administrator maintained inadequate financial controls, violated plan documents, and imprudently spent millions to build and maintain facilities at Konocti despite the resort's continuing financial losses.


The suit further alleges that the trustees which also include Mazzola's son, Lawrence Jr., did not require loan agreements or obtain a security interest in the resort. Local 38 also allegedly profited from a $6 million loan it made to the convalescent fund to prevent a bank foreclosure that would have forced the sale of the Konocti property in 2000.


The Labor Department suit seeks to restore all losses to the plans, correct transactions prohibited by law, give the plans a security interest in the convalescent fund and Konocti and return any illegal profits paid to the defendants. In addition, the suit is asking the court to remove the plan officials as fiduciaries and to permanently bar them from service to ERISA plans in the future.


Federal court documents report that the most recent filings in the case were made Jan. 8, and that the case is set to go to trial May 7.


At the same time, UA Local Convalescent Fund is in negotiations to sell Konocti Harbor to Kenwood Investments, owned by Darius Anderson, a well-connected political lobbyist and fundraiser.


The Mazzola family owns a 55-acre walnut orchard next to Konocti Harbor which they recently tried to have rezoned to commercial resort zoning in the new Rivieras Plan, a suggestion the Planning Commission accepted. However, the Board of Supervisors went with the Rivieras Plan Committee's original recommendation of keeping the land zoned rural residential.


Peter Windrem, attorney for the UA Local Convalescent Fund, said those zoning changes could possibly effect the sale's outcome.


A story published this week by Matt Smith of SF Weekly alleges that Anderson and Mazzola are working together to get a deal through that would allow Konocti Harbor to host a casino and, by doing so, would help solve problems arising from the federal lawsuit.


Smith, in his article, calls the casino plan a “a cozy all-in-the-Democratic-Party-family gambling casino deal.”


That's because Mazzola, like Anderson, is extremely well-connected in state politics and in the Bay Area in particular. He's followed in the footsteps of his father, Joe, and become a well-known Bay Area labor leader. He was a member of San Francisco Mayor Gavin Newsom's transition team in 2003; Newsom later reappointed him to San Francisco's Airport Commission. In addition, he is president of the San Francisco Building & Construction Trades Council.


In March 2001, almost five years before becoming Speaker of the House, Rep. Nancy Pelosi offered a statement into the Congressional Record during proceedings in the 107th Congress in which she praised Mazzola for “his years of dedicated service to the community.”


“At his father's knee, Larry learned how unions benefit working Americans,” Pelosi said.


Smith said the lawsuit could be solved by “creating the illusion” that the $36 million the suit alleges was diverted was actually invested in Konocti Harbor.


“One way to do that might involve declaring Konocti Harbor Resort an Indian reservation, cutting a deal with Las Vegas gambling interests, getting a token Indian tribe to front the deal, then presenting the results to Labor Department attorneys,” Smith writes.


That, he says, could cause the land value to “suddenly explode.”


“And the $36 million the Labor Department says Mazzola improperly flushed into a money-losing concert venue could theoretically be described as deft investing,” Smith writes.


Last week District 5 Supervisor Rob Brown began circulating a petition to stop such a casino plan from going through.


Brown said that he has information that five Northern California tribes – Upper Lake, Lower Lake, Pinoleville, Potter Valley and Scotts Valley – are seeking a tribal compact with the state to place a casino on the site once it's purchased.


He said Monday that he is scheduled to meet with officials later this month to find out more information about the plan.


Read Matt Smith's full story at www.sfweekly.com.


E-mail Elizabeth Larson at This email address is being protected from spambots. You need JavaScript enabled to view it..


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