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Louisiana Couple Pleads Guilty to Operating Fraudulent Multiple Employer Welfare Arrangement
NEW ORLEANS, LA – The U.S. District Court for the Eastern District of Louisiana accepted the guilty pleas of The Total Financial Group (TTFG) and its owners – Denis J. Joachim and Donna K. Joachim – after investigations by multiple government agencies – including the U.S. Department of Labor's Employee Benefit Security Administration (EBSA) and Office of Inspector General (OIG) – found Covington, Louisiana-based TTFG and the Joachims created, marketed, and operated a fraudulent multiple employer welfare arrangement (MEWA).
Denis J. Joachim pled guilty to conspiracy to commit money laundering and Donna K. Joachim pled guilty to conspiracy to defraud the IRS. Their company, TTFG, pled guilty to one count of conspiracy to make false statements and representations in connection with a MEWA and five counts of making false statements and representations in connection with a MEWA. The guilty pleas mark the first convictions under 29 U.S. Code § 1149's prohibition on false statements and representations in relation to a MEWA, in any cases nationwide. Additionally, the government identified the prior seizure of approximately $6,300,000 worth of the defendants' assets.
The fraudulent MEWA created by the Joachims and TTFG, known as "Classic 105," caused at least $40,000,000 in losses to the IRS and participants in the plan. More than 350 employer-clients and 4,400 employee-participants nationwide were enrolled in the program at its peak in 2016. The defendants collected about $25,543,341 in fees from employer-clients and employee-participants.
"The U.S. Department of Labor is committed to combating benefit fraud and protecting employees' hard-earned assets," said Assistant Secretary of Labor for the Employee Benefit Security Administration Preston Rutledge.
"The Joachims' fraudulent use of a multiple employer welfare arrangement to unjustly enrich themselves was a gross abuse of the fiduciary responsibilities employers and workers had entrusted to them. We will continue to investigate unscrupulous organizations and individuals engaged in these illicit schemes through our continued work with law enforcement partners to safeguard benefits designated for the health and welfare of American workers," said Scott Dahl, Inspector General for the U.S. Department of Labor.
Investigators found the Joachims and TTFG marketed Classic 105 to employers to provide a supplemental benefit plan to reimburse employees for medical expenses such as co-pays and deductibles. Classic 105 claimed to be comprised of several components including a tax-exempt contribution of between $1,000 and $1,600 per month made by an employee – which reduced the employee's taxable income – and fees paid by the employee and the employer directly to TTFG. TTFG told prospective employer-clients that participants would never have to make out-of-pocket payments and because of the tax savings, most participants would receive an increase in their net take home pay.
According to the indictment, TTFG arranged for the contributions to appear as a series of "paper transactions" that, in effect, did nothing more than reduce participants' taxable wages and employers' FICA payments improperly, without their knowledge of the impropriety. Consequently, TTFG and the Joachims caused at least $20,000,000 in federal FICA taxes as well as a "significant" amount of personal income taxes to be underpaid, amounts for which the employer-clients and employee-participants are now individually responsible. The only money actually paid to TTFG were the fees, which the Joachims used to make numerous personal expenses, including purchasing real estate and automobiles. As part of their plea, the Joachims are debarred from employment, consultation activities and any type of service or position related to labor organizations or benefit plans as described in 29 U.S.C. §§ 1111 and 504 for a period of 13 years.
This was a joint investigation by the EBSA offices in Kansas City, Missouri; Dallas, Texas, and Philadelphia, Pennsylvania; the Department of Labor's Office of the Inspector General – Office of Investigations; the IRS – Criminal Investigations; and the FBI. Eastern District of Louisiana Assistant U.S. (AUSA) Jordan Ginsberg prosecuted the case with the assistance of AUSA Maria Carboni (EDLA), Trial Attorney Jared Hasten of the Criminal Division's Fraud Section and Senior Trial Attorney Rebecca Pyne of the Criminal Division's Organized Crime and Gang Section, Labor-Management Racketeering Unit.
Employers and workers can reach EBSA toll-free at 866-444-3272 for help with problems related to private sector retirement and health plans. Additional information can be found at http://www.dol.gov/ebsa. Reach the Department's Office of Inspector General at https://www.oig.dol.gov/hotlinecontact.htm.
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Case No. 2:18-cr-00189-CJB-KWR