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Archived News Release--Caution:
information may be out of date.
For more information call: (202) 219- 8921.
A Texas federal court has frozen the assets of the
Arlington, Texas-based Association of Trust and Guaranty (ATG), its employee
benefit plans and their operators after more than $1 million intended to
provide health and workers compensation benefits was siphoned off by ATG and
its president.
The temporary restraining order obtained by the Labor
Department also appointed an independent manager to oversee the association and
its plan.
ATG purportedly markets its health and workers'
compensation benefit programs through sham labor unions it created. These
included the National Employees Trade Association Local 101, Affiliated Guilds
of America (AGA) and the National Employees Trade (NET) Alliance.
Each union sponsors a plan which cover participants in 20
states, including California, Arizona, Oklahoma, Texas, Missouri, Arkansas,
Michigan, Florida, Alabama, Georgia, Tennessee, Kentucky, North Carolina, South
Carolina, Virginia, Mississippi, Washington, D. C., Maryland, Utah, Colorado
and Illinois. ATG, operating under a multiplicity of business names, collected
both union dues and plan contributions from participating employers.
Lawrence Kenemore, who controls ATG, directed the
formation of the unions. Kenemore allegedly used the sham unions to market the
benefit programs to workers but siphoned the money for himself and ATG.
Kenemore previously owned Bestland Insurance Agency, Inc.,
which was shut down by the State of California in 1993 for repeated violations
of state insurance law. Shortly after the state shut down the operation,
Kenemore set up ATG to market health and workers compensation benefits to
employers.
At least nine state insurance departments have issued
cease and desist orders and injunctions against Kenemore. They include Texas,
Oklahoma, Colorado, Missouri, Nevada, Illinois, Georgia, Florida and
Michigan.
Named as defendants in the lawsuit are Kenemore, his wife
Sherry, ATG and plan trustees Chris Kellum, David Murphree, Pat Postle and Tim
Congle. The department alleges that Kenemore and his associates set up ATG to
continue a pattern of "misappropriating insurance premiums ... while resisting
all inquiries into their conduct." ATG, Kenemore and his wife allegedly
diverted a majority of employer contributions to themselves without regard to
the plans' solvency or their ability to pay promised benefits.
The department alleges ATG and Kenemore:
- made loan agreements with AGA, NET Alliance and trustee Chris Kellum
to retain employer contributions at various times as loans;
- selected National Claims Administration, a company operated by
Lawrence Kenemore, to process claims of the plans;
- failed to disclose information about employer contributions to
trustees of the Local 101 plan;
- commingled plan money with that of Kenemore and ATG and concealed the
true amount of plan contributions from trustees and the Labor Department.
The trustees were charged with permitting Kenemore and ATG
to manage plan money without any substantial oversight over plan assets,
agreeing to let ATG unilaterally make loans from employer contributions and
allowing the association to retain 20 percent of contributions as compensation
for minimal services allegedly provided to the plans.
The complaint asked the court to require that the
defendants reimburse the plans for any losses resulting from their misconduct,
to remove the defendants preliminarily and permanently from their positions
with the plans and to bar them from serving plans governed by the Employee
Retirement Income Security Act (ERISA) in the future. It also asks for an
independent manager to liquidate the plans and pay benefit claims.
This is another in the series of lawsuits filed by the
Labor Department against operators of fraudulent multiple employer welfare
arrangements (MEWAs) seeking to avoid state regulation by claiming to be
affiliated with legitimate labor unions.
The actions, filed Jan. 17 in federal district court in
Dallas, resulted from an investigation by the St. Louis office of the
department's Pension and Welfare Benefits Administration into alleged
violations of the ERISA. The order was entered the next day. A hearing on the
department's motion for a preliminary injunction is scheduled for Jan. 30.
Archived News Release--Caution:
information may be out of date.
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