Securities & Exchange Commission v. Capital Consultants, LLC

In these consolidated appeals, beneficiaries to a receivership complain about various aspects of the receiver’s plan of distribution. The district court approved the plan of distribution, and we affirm.

BACKGROUND

Capital Consultants, LLC (CCL), 1 was an Oregon investment management company that made investments for several hundred individuals, corporations, and employee benefit plans. The employee plans are retirement and other employee benefit plans subject to the Employee Retirement Income Security Act (ERISA). 2 Under investment advisory agreements and powers of attorney, CCL generally had broad discretion to invest funds on behalf of its clients in publicly-held securities as well as private assets such as real estate and private notes.

The Securities and Exchange Commission (SEC) and the United States Department of Labor (DOL) brought this suit to place CCL into receivership. These agencies claimed that CCL and its principals, Jeffrey and Barclay Grayson, had invested huge sums of client money in nearly worthless loans, and engaged in disloyal conduct and self-dealing. The briefs describe the CCL investments in private assets as “junk debt” and a Ponzi scheme.

The…

concurring and dissenting:

All members of the panel agree that the Receiver has done an excellent job in this difficult and complex case, and I agree with the majority’s opinion in all respects but one. Unlike the majority, I would hold that the district court erred in approving the 50% offset for damages recovered by ERISA plans from third parties.

The United States Secretary of Labor (“the Secretary”) has the statutory responsibility to administer ERISA. See, e.g., 29 U.S.C. §§ 1031 (c) and 1135 (authority to issue regulations); id. § 1132(a)(2) (authority to bring civil enforcement actions); id. § 1134 (investigative authority); id. § 1137 (administrative procedure); id. § 1138(appropriations to carry out “functions and duties” under ERISA). The Secretary contends that the 50% offset for third-party recoveries violates ERISA. I agree with the Secretary.

The Secretary was the first to file suit contending that Capital Consultants, LLC (“CCL”) had violated ERISA and seeking a receivership. After the Secretary filed suit, plan trustees filed suit under ERISA; non-ERISA investors filed suit under federal and state laws; and the Securities and Exchange Commission filed suit under…