SAN FRANCISCO -- The U.S. Department of Labor is
suing the trustees, consultant, and health claims administrator of an employee
benefit plan for mismanagement resulting in $3.6 million in unpaid health
benefit claims. The plan, the Teamsters Miscellaneous Employees Health and
Welfare Trust (TMET), provides health coverage and life insurance to
approximately 2,500 workers through employers and unions throughout the Central
Valley.
The lawsuit alleges that trustees failed to ensure
the plans financial solvency and failed to pay benefits while paying
excessive amounts to the plans consultant, McLaughlin and Associates,
Inc., and claims administrator, Claims Benefit Insurance Administrators, Inc.
Patrick C. McLaughlin, who serves as president of McLaughlin and Associates and
as secretary and treasurer of Claims Benefit Insurance Administrators, is also
named.
The Labor Departments lawsuit alleges that
McLaughlin used his positions with the consultant and claims administrator to
pay himself approximately $3.6 million, which greatly exceeded the amounts
provided in the companies written agreements with the plan.
According to the complaint filed today in U.S.
District Court in Sacramento, TMET has been operating at a loss since its
inception in 1993, and has resorted to obtaining loans to pay claims. As of May
1999, the plan had a cumulative deficit of over $6.5 million, including
approximately $3.6 million in unpaid claims.
Trustees Victor L. Shada and Ron Costa and former
trustees Toby Louden and Ron Rea are also named in the suit. The complaint
alleges that trustees Shada, Costa, Louden, and Rea never consulted with an
actuary or other expert to make sure the plan had enough money to pay claims,
or to determine whether the plan was offering a higher level of benefits than
it could afford, based on the rates charged to employers through collective
bargaining agreements. The defendant trustees also allegedly approved or
permitted payment of administrative expenses without requiring documentary
support and without any meaningful review of payments made.
The Labor Departments suit seeks payment of
past due claims; elimination of the claims deficit; restoration of losses
resulting from the breaches of the trustees, McLaughlin, MLA and CBI. It would
also remove Shada and Costa from their positions as fiduciaries, and require
that the consultant and claims administrator be replaced. The defendants would
also be barred from any future roles involving employee benefit plans.
TMET is a multi-employer, collectively-bargained
employee benefit plan which provides life insurance, medical, dental,
prescription drug and vision benefits for employees of participating employers
and unions throughout the Central Valley. As of July 31, 1998, there were 2,480
participants in the plan. The plan is now known as the Pacific States Health
and Welfare Trust.
The complaint is the result of an investigation
conducted by the Labor Departments Pension and Welfare Benefits
Administration San Francisco Regional Office. It was filed on March 17, 2000,
in the United States District Court for the Eastern District of California,
Sacramento Division, as Case No. CIV-S-00-0583 LKK/DAD. |