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Release Date: 10/14/2003
Release Number: 03-556
Contact Name: Gloria Della
Phone Number: 202.693.8666
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Washington, DC - As a result of a case brought
by the U.S. Department of Labor, a federal court in Reno, Nevada 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 court’s $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 expenses – including $1.5 million
paid to themselves -- while 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 department’s Employee Benefits
Security Administration investigated the case. Employers and workers can
reach the San Francisco Regional Office at 415.975.4600 or through EBSA’s
toll –free number, 1.866.444.3272 (EBSA), for help with problems
relating to private-sector health and pension plans. |
(Chao
v. Graf)
Civil Action No. CV-N-01-0698-DWH(RAM) |
U.S. Department of Labor
news releases are accessible on the Internet. The information in this news
release will be made available in alternate format upon request (large
print, Braille, audio tape or disc) from the Central Office for Assistive
Services and Technology. Please specify which news release when placing
your request. Call 202.693.7773 or TTY 202.693.7755. |