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News Release

Labor Department Settles Lawsuit Against California Company Over Unpaid Health Claims

Archived News Release — Caution: Information may be out of date.

Contact Name: Sharon Morrissey / Leonard Garofolo
Phone Number: 202.219.8921 / 415.975.4600

San Francisco - The U.S. Department of Labor has settled its lawsuit involving unpaid claims of participants of the health and welfare plan sponsored by Golden West Pancakes, Inc., a bankrupt Monterey County, Calif. corporation by obtaining a consent judgment against the corporation, the final defendant in the case along with company officials Rodney Rothstein and Kenneth Von Behren.

Earlier, the court ruled against Rothstein, company president, and Von Behren, who served as company vice-president and comptroller, and appointed an independent trustee to oversee management of the company-sponsored plan.

Under the consent judgments, Golden West, Rothstein and Von Behren must diligently and actively seek payment of the unpaid claims, including pursuing the corporation for restitution through bankruptcy proceedings. The consent judgment against Rothstein and Von Behren requires that their actions be under the supervision of the independent trustee.

According to the lawsuit filed May 27, Golden West, Rothstein and Von Behren failed to act in the best interests of the plan participants, thus violating the Employee Retirement Income Security Act (ERISA), the federal law which safeguards employee pension and health care benefits. The complaint alleged the defendants' imprudent conduct resulted in losses of approximately $217,000 in approved and unpaid participant medical and dental claims.

From March 31, 1993 to Dec. 31, 1994, the plan covered anywhere from 287 to 188 employees. Before 1993, Golden West provided medical and dental insurance coverage to its employees at no cost to them. The company terminated the plan because of increasing premiums and replaced it with a self-funded plan to provide similar benefits. The new plan provided for employee contributions based on the coverage elected as well as dependant coverage. The lawsuit alleges that the new plan was self-insured for claims up to $50,000, with stop-loss insurance covering claims over that amount.

According to the department's allegations, although Golden West made no promise to continue plan benefits, its plan provided that participants were entitled to payment of claims incurred up to the date of any plan termination.

The final judgment, entered Sept. 10 in the federal court in the Northern District of California, also required the company to notify plan participants of its bankruptcy and its intent to work to satisfy their claims.

In continuing to pursue its action against Golden West, Leonard Garofolo, regional director of the San Francisco office of the department's Pension and Welfare Benefits Administration, said, "When promises are made to employees that health benefits will be provided, those employers should keep those promises."

The case resulted from an investigation conducted by department's Pension and Welfare Benefit Administration's San Francisco Regional Office as part of a nationwide crackdown on employers' failure to pay benefits promised to employees. To date, the agency has opened 2,282 investigations of 401(k) pension plans and 287 health plan investigations and has recovered more than $35 million for participants in these types of plans.

(Herman v. Golden West Pancakes)
Civil Action #97-1303-CAL

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

Employee Benefits Security Administration
September 24, 1997
Release Number