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EBSA News Release: [10/14/2003] Contact Name: Gloria
Della Phone Number: (202) 693-8666
Nevada Court Enters $7.3 Million Judgment Against
Principals of Employers Mutual
WASHINGTONAs a result of a case brought by the U. S.
Department of Labor, a federal court in Reno, Nev. entered a default judgment
requiring the principals of Carson City-based Employers Mutual, LLC and
affiliated companies to pay $7.3 million in losses suffered by health plans
operated by the corporation. The judgment restores financial losses that
resulted from the self-dealing and mismanagement of James Lee Graf, William R.
Kokott, Nicholas E. Angelos, Kari Hanson and their companies.
The Employers Mutual defendants showed a callous disregard for the
health benefit needs of small business employers and their workers. At a time
when employers are finding it hard to obtain health coverage, these defendants
schemed to rob small businesses and workers of health benefits for personal
financial gain. The courts $7.3 million judgment is the first step toward
making these workers and their families financially whole, said U.S.
Secretary of Labor Elaine L. Chao.
The judgment also permits the department to seek additional money to
cover unpaid health claims of workers and their families, estimated at $27
million. Thomas Dillon, the independent manager appointed by the court, will
determine the exact amount of the unpaid claims owed by the plans.
In December 2001, the department obtained a temporary restraining order
freezing the assets of Employers Mutual, the affiliated associations and their
principals, and appointing Mr. Dillon to oversee the plans and pay benefits
owed to participants. Employers Mutual is a national network of 16 affiliated
associations that provided health benefits to more than 22,000 participants and
beneficiaries covered by employer-sponsored health plans.
The department also simultaneously filed a lawsuit alleging that the
defendants violated the Employee Retirement Income Security Act (ERISA) by
diverting a substantial portion of contributions collected by Employers Mutual
to their companies and personal accounts. From January to October 2001, the
defendants spent $6 million of plan assets purportedly on administrative
expensesincluding $1.5 million paid to themselveswhile paying only
$3 million in health benefits. The defendants also delayed processing health
claims (resulting in million of dollars in unpaid claims), failed to operate
the plans in an actuarially sound manner, and paid excessive fees for services
provided to the plans.
The San Francisco regional office of the departments Employee
Benefits Security Administration investigated the case. Employers and workers
can reach the San Francisco Regional Office at (415) 975-4600 or through
EBSAs tollfree number, 1-866-444-3272, for help with problems
relating to private-sector health and pension plans.
(Chao v. Graf) Civil Action No. CV-N-01-0698-DWH(RAM)
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