MANHATTAN (CN) - A construction union claims that Pryor Cashman's legal malpractice allowed a third-party administrator to steal or misappropriate $42 million from the union's retirement and annuity funds. The union says it paid Pryor Cashman $607 to $708 an hour for its services, the law firm's remuneration rising from $91,130 in 2003 to $176,917 in 2008.
Trustees of Construction Workers Local 147 claim the law office held itself out as lawyers "who regularly provide advice to clients to the numerous issues which may arise under the Employee Retirement Income Security Act of 1974 (ERISA)," including "those issues related to fiduciary duty, potential liability of employees, prohibited actions and other areas."
The union claims that "for more than a decade before November 2008, defendants were fund counsel and/or the only lawyers who represented and provided legal advice to the Annuity Fund, the Retirement Fund, and the ASB Fund (collectively, the 'Benefit Funds') and to their trustees."
However, the complaint states, "During that period of time, the third-party administration of the Benefit Funds, King Care LLC, its predecessor, King Administrator, and their principal, Melissa G. King (collectively, the 'King Parties'), stole or misappropriated approximately forty-two million ($42,000,000) dollars from the Benefit Funds."
A forensic accounting performed by Basil Castrovinci Associates, the third-party administrator that succeeded King Care, found that Melissa King had used the stamped, facsimile or computerized signatures of one or more trustees to draw checks on the fund, listing the amounts as payments of "other administrative expenses," according to the complaint in New York County Court.
Castrovinci found that from 2002 to 2008, King withdrew millions from the funds annually, the yearly misappropriation rising from just over $1 million in 2002 to $11.2 million in 2007, according to the complaint.
The union says King used the money to pay personal expenses ranging from purchases at Neiman Marcus, stays in luxury hotels and country clubs, and for equestrian-related services for her daughter.
King has been criminally charged and also faces civil charges in the Southern District of New York, the union says.
It adds that "But for the defendants' legal malpractice, the plaintiffs would not have sustained the aforesaid loss."
Also named as a defendant is Pryor Cashman attorney Christopher Joseph Sues.
The trustees seek $42 million in compensatory damages, punitive damages, pre- and post-judgment interests and court costs.
They are represented by William J. Dealy with Dealy & Silberstein and Fried & Epstein.