A federal judge has found the fiduciaries of a defunct national multi-employer benefit plan based in Cherry Hill, New Jersey, are liable for approximately $4.7 million in assets that were improperly diverted.
James Doyle and Cynthia Holloway, fiduciaries to the Professional Industrial Trade Workers Union Health and Welfare Fund, must make restitution to the plan, with interest, for violating the Employee Retirement Income Security Act (ERISA). The court determined that Doyle and others used the fake Professional Industrial Trade Workers Union as a front for a scheme to operate a purported, union-sponsored employee benefit plan.
To obtain medical benefits from the plan, employers and workers across the United States were required to join the phony union and make payments. Rather than use the funds to pay out health care benefits and pay reasonable costs of administration, most of the payments were used to cover bogus expenses including “union dues.” While Doyle diverted money that should have been used to pay benefits, Holloway failed to act as a prudent and loyal fiduciary by failing to put a stop to the scheme.
The court also found that the defendants marketed and ran the health plan in violation of federal law when they failed to administer the fund’s assets for the exclusive purpose of providing benefits to the fund’s participants and beneficiaries.
The decision resolves a lawsuit filed by the U.S. Department of Labor in 2005 and subsequent legal proceedings stemming from an investigation conducted by the department’s Employee Benefits Security Administration. Filed in the U.S. District Court for the District of New Jersey, the decision permanently bars Doyle and Holloway from serving as a fiduciary or service provider to any ERISA-covered employee benefit plan, and appoints an independent fiduciary to administer and ultimately terminate the plan. At its height, the plan had approximately 2,500 participants.
“Doyle used this benefit plan as the guise for an illegal moneymaking scheme that jeopardized the well-being of countless workers and their families. Holloway was in a position to put an end to the fraud, but failed to act,” says Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi. “The department’s persistence in pursuing this case through an appeal should send a message to those who think they can get away with conducting such an outlandish scheme.”
The case is Secretary of Labor v. Doyle et. al., Civil Action No. 1:2005-cv-02264.