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Release Date: July 17, 2008
Release Number: 08-987-SAN
Contact Name: Gloria Della/Rick Manning
Phone Number: 202.693.8664/202.693.4676
San Francisco — The U.S. Department of Labor
has sued a purported employer association, a health fund trustee, and
the fund’s consultant over alleged imprudent management of the
Manufacturing and Industrial Workers Benefit Fund (MIWU) of Bryan,
Texas. The defendants’ actions allegedly resulted in more than $3.4
million in unpaid health claims affecting participants in Arizona,
California, Florida, Georgia, Illinois, Texas and other states.
“The mismanagement of this fund has meant that
these workers and their families are saddled with $3.4 million in unpaid
health claims,” said U.S. Secretary of Labor Elaine L. Chao. “We
will be tireless in seeking full restitution, correcting the fund’s
operations and barring the defendants from ever again being in a
position to harm workers interests in an ERISA benefit plan.”
According to the lawsuit, Raymond Palombo, Mitchel
Coneley, Leonard Steinberg, Contractors and Merchants Association (CMA),
and the Small and Independent Business Associates Inc. (SIBA) violated
the Employee Retirement Income Security Act (ERISA) by causing the
insolvency of the MIWU health fund and by their failure to hold the fund
assets in trust. The defendants permitted Palombo to transfer the health
claim liabilities of members of his sham employer association, CMA, to
the MIWU fund. Palombo allegedly diverted plan assets to benefit
himself, the defendants and others; improperly set contribution rates
for 880 participants of CMA; enrolled ineligible individuals in the
health fund; and failed to properly fund the plan.
The MIWU health fund became financially insolvent in
2005 due to the transfer of CMA members to the fund. At the time of the
improper actions, Palombo was the president and sole shareholder of CMA,
and Steinberg was the president of SIBA and provided consulting services
to the MIWU health fund through SIBA. Coneley was the fund’s trustee.
The suit, filed in the U.S. District Court for the
Northern District of Georgia in Atlanta, seeks to have the defendants
restore to the fund all losses with interest, undo all prohibited
transactions, offset any claims for benefits against the MIWU fund, and
permanently bar the defendants from serving in a fiduciary capacity to
any ERISA-covered plan in the future. In related Labor Department
litigation, the court appointed an independent fiduciary to pay health
claims of affected participants and beneficiaries and to manage the more
than $1.9 million in fund assets recovered by the department and
collected by the independent fiduciary as of May 2008.
The Los Angeles Regional Office of the department’s
Employee Benefits Security Administration (EBSA) investigated this case.
Employers and workers can reach the Los Angeles office at 626.229.1000,
or EBSA toll-free at 866.444.3272, for help with problems relating to
private sector retirement and health plans.
Copies of the legal documents in the Chao v. Palombo
case are available on EBSA’s Web site at www.dol.gov/ebsa. Tips on
purchasing health benefits may be found at http://www.dol.gov/ebsa/newsroom/fshlthinstips.html.
Chao v. Palumbo
Civil Action Number 1:08-CV-2017-BBM
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