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Archived News Release--Caution:
information may be out of date.
For more information call: (202) 219-8921
The Department of Labor has obtained a temporary restraining order
freezing the assets of the trustees of the International Workers' Guild health
plan, two affiliated organizations and their principals for mismanaging the
assets of the health plan covering participants in 21 states.
"This health plan has $25 million in unprocessed medical claims,"
Secretary of Labor Alexis M. Herman said. "We had to stop the leakage of money
to protect the people who depend on this plan for health benefits."
The temporary restraining order places the health plan under the
control of an independent fiduciary, Kenneth Feinberg, who will manage the
plan's finances, oversee the operations of the plan and make recommendations
about its continued operation.
The department said in its suit that IWG is a "sham union" which
operated the plan for employers with "bogus" collective bargaining agreements
with the National Association of Business Owners and Professionals, a sham
"employer association".
The court removed Fidelity Group, Inc.-- the plan administrator,
officers Eugene Duncan, Dwayne Samuels and Lee Jarmolowsky, and others
associated with it, including David Spooner, the National Association of
Business Owners and Professionals Inc., the wives of Duncan and Samuels, and
trustees Paul Askew, Charles Bradley, Noel Shaw Jr. and Terence Rhue.
The plan was created in 1996, and was marketed to small employers. At
its height, 9,300 participants were covered by the plan, which now covers
approximately 3,600 participants. The plan was marketed by consultants,
insurance agents and related professionals.
The Labor Department's lawsuit, filed with the request for restraining
order, alleges that from 1995 the trustees and others violated the provisions
of the Employee Retirement Income Security Act (ERISA) because they:
- paid excessive administrative fees from health plan assets to
Fidelity for its service as the third-party administrator;
- diverted assets of the health plan to IWG and NABOP in the form of
sham union and association fees;
- permitted diversion of health fund assets to pay the salaries of the
wives of Samuels and Duncan, who were employed by NABOP;
- failed to monitor and administer the fund's claims processing system
and adjudication system, thereby resulting in a $25 million backlog of
unprocessed health claims;
- failed to assure the financial soundness of the plan through the use
of adequate underwriting and sound actuarial analysis;
- failed to establish adequate contributions rates and maintain cash
reserves to assure the payment of claims;
- allowed the plan to become insolvent and used plan money for
prohibited purposes; and
- permitted the NABOP and IWG to be created or operated primarily to
divert plan assets from the payment of health benefits.
The lawsuit seeks to require the defendants to restore any losses
suffered by the plan, to return any assets they illegally received and to
permanently bar them from serving as fiduciaries or service providers to any
plan governed by ERISA.
This case resulted from an investigation conducted by the New York
Regional Office of the Department's Pension and Welfare Benefits Administration
into alleged violations of ERISA. The lawsuit seeking a temporary restraining
order was filed in U. S. District Court in Brooklyn.
Archived News Release--Caution:
information may be out of date.
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