News Release

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US Labor Department sues defunct construction company in California and Nevada to restore losses from fiduciary breaches of employees' benefits plan

Date of action: October 8, 2015

Type of action: Complaint

Name of defendants: Draeger Construction Inc.; Draeger Construction LLC; Draeger Construction Inc. Health and Welfare Plan; and Jeffrey Draeger, an individual

Allegations: Based on an investigation conducted by the U.S. Department of Labor’s Employee Benefits Security Administration, the department has filed a complaint alleging that Jeffrey Draeger and the corporate defendants violated the Employee Retirement Income Security Act (ERISA) when they failed to forward withheld employee contributions and COBRA payments to the firms’ health and welfare plan. The complaint also alleges that the defendants failed to provide participants with timely notice that they were at risk of losing their insurance coverage. In fact, participants lost such coverage due to the fiduciaries’ nonpayment of insurance premiums.

Specifically, the department alleges that at least between August 2012 and October 2012, the defendants withheld employee contributions totaling not less than $60,080 from plan participants’ weekly paychecks and failed to remit those amounts to the plan. Instead, they retained and comingled those assets within the company’s general banking account for non-plan purposes. The defendants also received not less than $3,264 in COBRA payments from participants but failed to forward those amounts to the plan.

In the complaint, the department also alleges that the defendants failed to provide participants with timely notice that they were at risk of losing their health insurance coverage, and eventually lost their coverage, due to the fiduciaries’ nonpayment of premiums. Participants incurred more than $62,000 in uncovered medical claims as a result of their cancelled coverage.

Resolution: The department is asking the court to order Draeger Construction Inc., Draeger Construction LLC, Draeger Construction Inc. Health and Welfare Plan, and Jeffrey Draeger to restore any losses to the plan resulting from their fiduciary breaches, and to correct the prohibited transactions. The department also seeks to remove and permanently enjoin the defendants from serving as fiduciaries or service providers of any plan covered by ERISA. The department is also seeking the court to order the defendants to pay all uncovered medical claims incurred by participants as a result of the alleged fiduciary braches and, if necessary, order the appointment of an independent fiduciary to distribute recovered plan assets.

Court: United States District Court for the Northern District of California

Docket Number: CV 15-4668

U.S. Department of Labor news materials are accessible at www.dol.gov. The department’s Reasonable Accommodation Resource Center converts departmental information and documents into alternative formats, which include Braille and large print. For alternative format requests, please contact the department at (202) 693-7828 (voice) or (800) 877-8339 (federal relay).

EBSA News Release: 
10/21/2015
Release Number: 
15-2074-SAN (SF-66)