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The U.S. Department of Labor today obtained a
preliminary injunction freezing the assets of third-party administrator
Administrative Services of Texas, Inc. of Houston, its parent Administrator
Services of North America and a former corporate executive to prevent further
depletion of the assets of client welfare plans whose accounts were held by
them.
The order also appoints Jack M. Webb as the
independent fiduciary with authority to operate the plans.
The department also simultaneously filed a lawsuit
against the company, its parent and former corporate executive Mark A. Strange.
The defendants were alleged to have violated the Employee Retirement Income
Security Act by using the assets of client plans for the benefit of
Administrative Services of Texas and Strange.
According to the lawsuit, Strange signed and
authorized $1,027,188 through a series of transfers from plan trust accounts to
corporate accounts between Oct. 29, 1998 and March 3, 1999. Approximately
$305,220 was wired back into the trust accounts leaving a shortfall of
$721,968.
The lawsuit also alleges that the defendants
transferred approximately $508,400 of plan assets from refund payments from
service providers and COBRA payments which were not properly forwarded to the
plans’ trust accounts, but were instead used to pay operating expenses of
defendants ASONA and ASO Texas.
In addition, Strange allegedly diverted some
$332,700 in plan trust funds for his own personal expenses including down
payment on a Jaguar, payment of a personal car note, payment on a $100,000
personal bank loan and American Express credit card charges.
The lawsuit asks that defendants restore to the
plans the lost money, plus interest, be removed from their positions and be
barred permanently from acting as fiduciaries to the plans and any other
employee benefit plan covered by ERISA.
Administrative Services Texas provided various
services for self-funded insurance plans sponsored by a variety of employers.
Of the 38 plans served by the company, the Dallas Regional Office of the
Pension and Welfare Benefits Administration estimated that a majority of the
plans affected by the defendants’ alleged misdeeds were governed by ERISA.
The preliminary injunction was signed today in federal district court in
Houston.
Bruce Ruud, regional director of the five-state
region headquartered in Dallas, Texas, praised the cooperative efforts of the
Texas Attorney General’s office, the Texas Department of Insurance and
Department of Labor investigators for their hard work and dedication. He adds
that persons who feel there may be problems in their benefit plans should call
his office at 214- 767-6831.
(Herman v. Administrative Services of North
America, Inc. et al.)
Civil Action No. H-99-1793 |
