Ex-Benefits Administrator Charged in $40M Embezzlement Case
Prosecutors in the case allege that the spending included $5 million for horses, $300,000 for women’s clothes at Neiman Marcus and about $1 million for jewelry.
A news release from Preet Bharara, U.S. Attorney for the Southern District of New York, said Melissa G. King was charged in a 12-count indictment filed in federal court in New York with transferring the money out of the accounts of the Compressed Air and Free Air Foundations, Tunnels, Caissons, Subways, Cofferdams, Sewer Construction Workers Local 147 of New York, New Jersey States and Vicinity AFL-CIO between 2002 and 2008.
The news release said the funds were moved from Local 147 accounts to a Bank of America account controlled by King’s company, King Care, and that the checks ranged from $20,000 to $65,000 – sometimes several in a single day.
The news release said King served as benefits administrator from September 2002 until December 2008 for the union, which had about 1,000 members in the New York City area. She received an annual salary of $540,000 for her work.
Under union contracts, the union provided various benefits to members including retirement benefits, pension annuities, workers compensation, severance payments, unemployment benefits, and certain medical expenses and death benefits.
King’s company was responsible for various administrative tasks on behalf of the Local 147 Funds, such as collecting employer contributions, maintaining bank accounts, determining eligibility for benefits, paying claims to beneficiaries, filing reports with regulators, maintaining a general ledger of the funds’ income and expenses, and providing reports to the funds’ trustees, prosecutors said.
Allegations of Extravagant Spending
Prosecutors claim the money in question actually went to pay a series of extravagant bills including:
- $7 million to American Express;
- $500,000 transferred to an account at E-Trade Securities as payment for a horse;
- more than $150,000 to the Ritz Carlton resort in Palm Beach, Florida;
- more than $900,000 to pay the mortgage on King’s Westchester County, New York home;
- hundreds of thousands of dollars to pay for three housekeepers, a tutor for King's children, and payments to King's parents and others;
- nearly a hundred thousand dollars for approximately 13 hours of flight time on a private jet; and
- more than $300,000 to purchase a 2005 Porsche Cayenne, a 2008 Mercedes-Benz S Class, a 2008 Mercedes-Benz CLK, and a 2008 Range Rover.
King, 58, is charged with one count of theft and embezzlement in connection with employee benefit plans, and eleven counts of money laundering. If convicted, she faces a maximum sentence of five years in prison on the embezzlement count, and 10 years in prison on each of the eleven money laundering counts, for a total of 115 years.
The indictment also seeks forfeiture of all of the property King is accused of buying with the embezzled funds, including real estate, luxury vehicles, jewelry and precious stones, nine horses, and the contents of several bank accounts.
"Today's indictment serves as a warning to third‑party providers who deliberately embezzle union employee benefit funds and jeopardize the employment‑related benefits of union members, including pension annuities, retirement benefits, and medical expenses," said Department of Labor Deputy Inspector General Daniel R. Petrole, in the announcement.