The DOL filed its suit, Perez v. Pro Systems Corp, et al (docket number: 14-cv-1326), in the U.S. District Court for Minnesota, alleging that defendants Pro Systems Corp., Pro Resources Corp., MICROPRO Inc. violated the Employee Retirement Income Security Act (ERISA) by failing to disclose to clients that some fees collected for insurance costs for the Pro Systems Corporation Group Health Plan were used for non-health plan purposes.
The Pro Systems Corp. Group Health Plan provided health care services for clients of Pro Systems, PRO Resources and MICROPRO, a trio of professional employer organizations based in Detroit Lakes, Minnesota, which administer benefit programs for the employees of client companies.
An investigation by the DOL’s Employee Benefits Security Administration (EBSA) found Pro Systems Corp., which was the plan administrator of the Pro Systems Corp. Group Health Plan, its Chief Operating Officer James Piche and Chief Executive Officer Michael Brodsho, directed the collection of an “other insurance costs” fee, ranging between $80 to $160 monthly per participating employee, from its client companies between January 1, 2006, and December 31, 2011. The companies, Pro Systems, PRO Resources and MICROPRO, retained those fees in the company’s general operating funds. Piche and Brodsho were also named as defendants in the DOL’s suit.
The EBSA also found Pische and Brodsho improperly directed the transfer of a total of $245,000 in funds from the health plan assets to the accounts of PRO Resources and Pro Systems. Additionally, Piche transferred $25,000 in health plan assets to himself in May 2006.
The DOL suit requests an accounting by Pro Systems, PRO Resources and MICROPRO, Piche and Brodsho of all transactions and losses to the Pro Systems Corp. Group Health Plan, including all unjust enrichment or profits resulting from their fiduciary breaches, and asks the court to require the defendants to make good on those losses and repay any profits received.
In addition, the DOL is asking the court to prevent the defendants from serving as a fiduciary to any ERISA-covered benefit plan in the future and to require the companies to disclose in detail to former, current and future clients information concerning the amounts retained for “other insurance costs” and fees.
The full text of the complaint can be downloaded here.