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Archived News Release--Caution:
information may be out of date.
For more information call: (202) 219-8921
The Labor Department announced today it will pursue additional charges
against managers of Chicago-based group health and welfare funds who allegedly
used assets to pay expenses for cell phones and health club memberships while
as much as $5 million in health and welfare benefits went unpaid for some 3,000
workers.
"When the Labor Department finds fund managers joy riding with workers
benefit assets we will take swift and appropriate action," said Acting
Secretary of Labor Cynthia Metzler. "Sadly, the workers and the health care
providers have been left holding the bag because of the reckless disregard
demonstrated by a handful of individuals."
According to the lawsuit, the trust fiduciaries allegedly diverted
workers' contributions to their health plans using the money for their own
personal medical and recreational expenses. Under the guise of union dues,
association fees, commissions or other charges to the trusts, the funds were
illegally used to pay:
- personal expenses such as cellular phones, health club memberships,
exercise equipment and car repairs;
- a $11,000 dental bill for fiduciaries even though they were not
covered by the IPC's dental program;
- over $20,000 in severance pay to and other employees of the IPC
trust upon the closure of the trust; and
- all of the medical and other claims of defendant Espisito during
July 1996 amounting to more than $25,000 when the trust was in dire financial
condition and most other participants and beneficiaries were receiving little
or no payments on their medical claims.
The complaint amends a lawsuit filed in August 1996 to include new
defendants: additional trustees to The International Professional, Craft and
Maintenance Employees Association Trust (IPC) as defendants; "purported"
employer associations; and service centers to the trusts and their individual
owners. These additional defendants are based in Arkansas, California,
Illinois, Maryland and Tennessee.
Olena Berg, Assistant Secretary for Pension and Welfare Benefits
Administration, said, "These individuals used health benefit funds like their
personal bank accounts. They even paid for their own benefits before covering
claims of covered workers and their dependents. The department is vigorously
pursuing such cases to make sure that funds for health benefits are not
diverted from plans at the expense of innocent small businesses and their
employees."
The Professional Employees and Affiliates Association Trust (PEAA) took
over the IPC trust. Both trusts, while created as purported collectively
bargained plans, are suspected to be welfare plans known as multiple employer
welfare arrangements (MEWAs). MEWAS allow small businesses to pool their
benefit plans in a single collective trust.
The department also petitioned the court for and was granted a
temporary restraining order and preliminary injunction freezing the assets of
the IPC trust and the defendants. While the restraining order froze most of the
original defendants' assets, the injunction essentially froze only the assets
of the two trusts. Finally, the court appointed an independent trustee to
oversee the trusts.
The department is seeking restitution of all losses suffered by the two
trusts, return of illegal payments and profits received by the defendants and
posting of a bond to assure adequate funds are available to offset any future
losses. The lawsuit also seeks to remove the defendants from their positions
with the trusts or as service providers, to permanently bar them from
affiliation with any plan governed by ERISA and to appoint an independent
fiduciary.
Named in the lawsuit are trustees John J. Wolfe, Susan Espisito, Ronald
Lauria, James M. Kennelly, Gerald Lee, Frank L. Sutfin and Richard Wesley,
Sandra Spencer and Timothy Doyle; IPC, union locals 1 and 100 and their
successor unions; employer associations American Service Contractors
Association, American Association of Service Professionals, National Corporate
Services Association, National Religious Workers Association, and Alliance for
Alternatives in Healthcare; service centers National Benefit Group Inc.,
American National Benefit Group Inc., Alternative Health Insurance Services
Inc., AIA Inc., Murphy and Associates Inc., National Alliance of PPO Networks
Inc. and their owners; and the computer consulting firm of L-Tech Enterprises.
Also named were the individual owners of the associations and companies,
including Elwood J. Trader, Paul T. Wood, Brandon E. Trader, Steven Gorman,
Herbert David Abbott, Jarman Holland and David Lasley.
Both cases resulted from an investigation by PWBA's Chicago Regional
Office into alleged violations of federal pension law. This case was filed on
Feb. 21 in federal district court in Chicago.
Archived News Release--Caution:
information may be out of date.
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