LAKE COUNTY – A court order that will settle a federal case over Konocti Harbor Resort & Spa is awaiting a judge's signature to become final.
As Lake County News reported in May, a tentative settlement was reached May 15 between the U.S. Department of Labor and trustees of Local 38 of the United Association of Plumbers, Pipefitters and Journeymen.
The Department of Labor filed suit against Local 38, its current and former trustees and pension plan administrator in November 2004, alleging the union had diverted more than $36 million in assets from five employee benefit plans to operate and renovate Konocti Harbor.
By diverting the funds, the Department of Labor claimed the trustees, among them Lawrence J. Mazzola Sr. – business manager and financial secretary-treasurer of Local 38 – violated the Employee Retirement Income Security Act (ERISA).
On Aug. 1, the Department of Labor filed an unopposed motion for entry of a consent order to make final the settlement, according to court documents obtained by Lake County News.
James Baker, attorney for Local 38, said Judge Phyllis J. Hamilton's signature is required to finally put the case to rest. Until the case is finally signed off, Baker said he couldn't comment about the settlement itself.
He did say, however, that it has taken time to get the required signatures from the 14 trustees, the Department of Labor and ULICO Casualty Co., the insurance agency which will pay the $3.5 million agreed to in the settlement.
The Department of Labor has so far refused comment on the case when contacted by Lake County News.
Of that $3.5 million settlement, $2,916,667 million must be paid to the pension plan, with $583,333 paid to the US Treasury as a civil penalty under ERISA rules.
The settlement terms require most of the trustees, including Mazzola Sr., to resign or retire from the board of trustees. Those who have not retired “have agreed to be permanently barred from serving as fiduciaries or service providers to any ERISA-covered employee benefit plan,” the court documents state.
Mazzola's son, Lawrence J. Mazzola Jr., will be one of two trustees who may continue on the board so long as they complete training on their fiduciary responsibilities, the settlement explains.
The court has appointed a plan administrator who will have exclusive administrative authority over Local 38's ERISA plans for six years, according to the settlement.
WhiteStar Advisors LLC has been appointed as independent fiduciary, the documents show.
WhiteStar's “primary mandate” is selling Konocti Harbor Resort & Spa. Although the sale isn't required as a condition of the settlement, court documents show that the firm Page Mill Properties of Palo Alto is in negotiations to buy the resort – which Local 38's Convalescent Fund purchased in 1959 for $200,000 – for $25 million.
Baker said he could not comment on the sale because it is under a confidentiality agreement.
Page Mill representatives reportedly toured Konocti Harbor earlier this summer.
WhiteStar previously worked with Kenwood Investments, which had expressed interest in establishing an Indian casino at the resort. But that plan met local resistance and culminated in a February vote by the Board of Supervisors to accept a resolution by Supervisor Rob Brown against Indian gaming at Konocti Harbor.
That roadblock led Kenwood to pull out of the deal earlier this year.
While it manages Konocti Harbor's sale, WhiteStar will have “independent control and discretion to operate, manage or terminate Konocti's operations to preserve its value until it is sold,” the court documents state.
Proceeds from Konocti's sale must be distributed back to Local 38 and the pension fund, with the first $4 million owed to Local 38 for the outstanding principal balance and unpaid interest on a 2000 loan it made to the Convalescent Trust Fund.
What the sale might ultimately mean for the Mazzola family – whose patriarch, Joe, is the namesake of Konocti Harbor's indoor showroom – isn't yet known.
They own 10 parcels along Emerald Drive, Northslope Drive and Soda Bay Road in Kelseyville, many in Konocti Harbor's immediate vicinity. Two of the parcels – both purchased in 1999 – amount to 215 acres.
One of the pieces of property is a 55-acre orchard that became a topic of concern during community meetings for the Rivieras Plan in January. That property had been a candidate for rezoning because of the potential sale to Kenwood Investments, which had wanted to expand the resort to include condominiums and timeshares.
The Board of Supervisors decided to zone the orchard as rural residential rather than commercial resort zoning, which the Planning Commission originally had suggested, which means it can only be developed at a density of one home per acre.
E-mail Elizabeth Larson at
{mos_sb_discuss:2}
How to resolve AdBlock issue? 
