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Employee Benefits Security Administration

News Release

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Release Date: April 2, 2007
Release Number: 07-436-PHI (ebsa 07-039)
Contact Name: Gloria Della/Peter Hong
Phone Number: 202.693.8664/202.693.4676

U.S. Labor Department recovers more than $2 million to pay New Jersey benefit plan health claims

Newark, N.J. - The U.S. Department of Labor has obtained a court judgment requiring the former trustees of the New Jersey Licensed Beverage Association multiple employer welfare arrangement (MEWA) in Trenton to restore $1.65 million as restitution for mismanagement of the plan. As a result of a separate judgment, another $600,000 in restitution already has been paid to the plan by co-defendant Midlantic Healthcare Inc. Besides the restitution, the trustees are permanently barred from serving in a fiduciary capacity to any employee benefit plan governed by the Employee Retirement Income Security Act (ERISA) in the future.

“The mismanagement of this benefits plan was an inexcusable betrayal of the thousands of New Jersey workers who were left on the hook for health care bills,” said U.S. Secretary of Labor Elaine L. Chao. “I commend the court for ordering over $2 million in restitution and permanently barring these untrustworthy trustees from ever again being in a fiduciary capacity involving an employee benefit plan under ERISA.”

The Labor Department’s lawsuit alleged that the defendants failed to determine and maintain adequate funding levels to pay benefits from 1998 to 2003 and did not have adequate contribution rates to support benefit payments. The following were named as defendants: the New Jersey Licensed Beverage Association Inc.; plan administrator Midlantic Healthcare Inc. and its vice president, Stephan DiTomasso; former plan trustees Joseph Ardire, Richard Bellshot, William Cleary, Melvin Gitler, James Hill, Robert Marciani, Michael Marsh, Lewis Rothbart, Robert Scerbo and Frank Zanotti; and plan fiduciaries Randy Normand and Mary Roenick.

Midlantic and DiTomasso allegedly did not provide information to the plan trustees and fiduciaries regarding the financial condition of the plan and failed to manage it in a financially sound manner. Plan fiduciaries allegedly failed to remove Midlantic and its principal and did not properly monitor the actions of the plan administrator. David Silverman, the plan’s independent fiduciary, was appointed by the court to oversee the plan and use its assets to maximize payment of eligible claims.

The New Jersey Licensed Beverage Association Inc. sponsored the medical plan for as many as 3,895 employees who worked in bars and restaurants through the state of New Jersey and elsewhere. The plan ceased operations in August 2003, at which time the plan had an unpaid claim backlog of $6,220,323.

The suit, filed in federal district court in Newark, resulted from an investigation conducted by the New York Regional Office of the Labor Department’s Employee Benefits Security Administration (EBSA). EBSA’s Web site includes health benefits tips for small employers at Employers and workers can reach EBSA’s New York office at 212.607.8600 or toll-free at 1.866.444.EBSA (3272) for help with problems relating to private sector retirement and health plans.

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