Saturday, 01 October 2022

Federal suit over Konocti Harbor settled

KELSEYVILLE The US Department of Labor has settled a two-and-a-half-year old civil suit against the owners of Konocti Harbor Resort & Spa.


According to court documents obtained by Lake County News, the suit which was filed in November 2004 was resolved in a May 15 settlement conference presided over by Magistrate Judge Bernard Zimmerman.


As Lake County News previously reported, 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 employee benefit plans in question were UA Local 38's Pension Trust Fund, Scholarship Trust Fund, Health & Welfare Trust Fund, Apprentice & Journeyman Training Trust Fund and Vacation & Holiday Trust Fund.


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


The lawsuit alleged that the fund's trustees, including Lawrence J. Mazzola Sr., business manager and financial secretary-treasurer of Local 38, violated the Employee Retirement Income Security Act (ERISA) by diverting the funds.


ERISA is a 1974 federal law that establishes protection to individuals covered by private industry health and pension plans.


Mazzola, son of labor leader Joe Mazzola – and namesake of Konocti Harbor's resort's indoor showroom – was named personally in the suit, as was his son, Lawrence Mazzola Jr.


In addition to the Mazzolas, about one dozen other men who had fiduciary responsibility as members of the joint board of trustees that governed Local 38's ERISA plans were named in the lawsuit.


James Baker, attorney for Mazzola and Local 38 in the case, confirmed this week that the case had been settled.


However, Baker declined to discuss the tentative settlement, preferring to wait until the details are finalized next month.


As part of the agreement, the Department of Labor will receive a $3.5 million payment, which will be covered by Local 38's insurance company, ULICO Casualty Co.


Judge Zimmerman noted in the settlement conference that a sale of Konocti Harbor is expected to be completed soon, with the funds from that sale going to reimburse Local 38 and the pension fund. (For the full story of the Konocti Harbor sale, see the related story, “Konocti Harbor sale in the works.”)


Other terms of the settlement include the Mazzola and the other named defendants' resignation from the joint board of trustees and installation of new trustees by Dec. 31, according to court documents.


Two of the named defendants, Lawrence Mazzola Jr. and Robert Buckley Jr., were not required to resign, court documents state; however, they have “agreed to complete a course of training in fiduciary duties as a condition of remaining on the board,” Zimmerman stated.


Mazzola Sr. also has agreed to resign from his position with the Plumbers Union's International Training Fund within the next two years, court documents reported.


The Department of Labor stipulated that those defendants who were required to resign from the joint board “be permanently barred from again being fiduciaries of any ERISA-covered plans or service providers.”


Other settlement terms include appointing an independent plan administrator to develop a system of controls over the ERISA plan's cash flows for a term of six years.


“This is an important moment for you,” Zimmerman told the defendants. “You will be closing, hopefully, a chapter, a long chapter in your life.”


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


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