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Archived News Release Caution: Information may be out of date. Archived News Release Caution: Information may be out of date.
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The U.S. Department of Labor today is seeking a temporary restraining
order and preliminary injunction to place an Illinois-based group health and
welfare fund under the control of an independent fiduciary. Some 3,000 workers
nationwide were left with approximately $2.3 million in unpaid health benefit
and worker compensation claims.
The department filed the request because of the financial collapse of
the International Professional, Craft & Maintenance Association Trust (IPC
Trust). The defendants call the trust a Taft-Hartley plan, but, in fact, the
arrangement may be a welfare benefit trust, known as a multiple employer
welfare arrangement (MEWA).
IPC Trust officials allegedly misused assets intended to pay health and
welfare benefits and failed to ensure that the rate of employer contributions
was sufficient to support benefits to be provided by the trust.
Workers covered by the trust, located mostly in small businesses
throughout the nation, ranged from ministers to television repairmen who relied
on the trust to provide their health and benefit insurance.
Besides freezing the assets of the trust and the defendants pending the
court order, the department seeks to have the past and present trustees removed
from their positions and barred from providing any services or receiving
compensation from any plans governed by federal pension law. The department has
recommended that Betty Cordial be named to the position of independent
fiduciary.
Individuals cited in the lawsuit are John J. Wolfe, Gerald A. Lee,
Richard J. Wesley, Frank L. Sutfin, Ronald D. Lauria, James W. Kennelly and
Susan Espisito, all of whom, according to the lawsuit, served as trustees to
the IPC Trust.
Named, in addition to IPC Trust, are its sponsoring organizations, the
American Service Contractors Association, and the union established by Wesley,
Lee and Wolfe, the International Professional Craft and Maintenance Employees
Union, and its Locals 1 and 100.
Defendants Wesley, Kennelly and Lee broke from the original group and
formed the new Professional and Affiliates Association Trust on July 1. During
their dispute with the original group, the "old" Locals 1 and 100 of the
International were dissolved and assets transferred to the "new" Locals 1 and
100. At that time, Lee and Wesley began contacting employers to send their
contributions to the new "unions" as opposed to the International, leaving the
trust with virtually no assets and a minimal stream of income from employer
contributions.
Operating since October 1993, the defendants conducted no apparent
legitimate union activities but marketed health and welfare benefit plans
through approximately 12 service centers, which, in essence, were insurance
brokers.
The defendants allegedly repeatedly engaged in transactions prohibited
by the Employee Retirement Income Security Act by diverting employer
contributions intended for employee benefits to themselves or to entities owned
by them, through direct payments or under the guise of "union dues,"
"association fees," commissions or other charges to the IPC Trust.
In this case, expenses by the trust ranged from a high of almost 56
percent to a low of 21.5 percent. The department considers these expenses to be
excessive and egregious. Expenses of legitimate, similar health plans represent
at most 15 per cent of employer expenses on plan expenses.
The lawsuit is the result of an investigation of the Chicago office of
the department's Pension and Welfare Benefits
Administration into alleged violations of federal pension law. It was filed
in the federal district court in Chicago and a hearing is scheduled for late
today in the court room of Judge Suzanne Conlon.
(Reich v. Wolfe, et al)
Civil Action # 96-C-4801 (Coar)
Archived News Release Caution: Information may be out of date.
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