Secretary of Labor Hilda L. Solis Print This Page Print This Page  Decrease Text Size Increase Text Size Text Size  Email This Page E-mail This Page

Archived News Release — Caution: Information may be out of date.

U.S. DEPARTMENT OF LABOR

PENSION AND WELFARE BENEFITS ADMINISTRATION

FEDERAL COURT FREEZES ASSETS OF TEXAS UNIONS

Friday, Jan. 20, 1995

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.