Louisiana Home Health Care Providers Sued for Misuse of Pension

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor today sued five home health care firms located throughout Louisiana, their principals and trustees of the firms’ pension plans for improperly using pension plan assets to benefit affiliated companies and plan trustees and to purchase the stock of a related company.

Named as corporate defendants are Home Care Center Inc., Golden Age Home Care of Baton Rouge Inc., Golden Age Home Care of Southern Louisiana Inc., Golden Age Home Care of Monroe Inc., Golden Age Home Care Hammond Inc., Southern Style Success Inc. and Golden Goose Enterprises Inc.; their owners Martha Sewell and John Herring; and plan trustees Ernest Perry and Larry Reeves.

The home health care firms, which are reimbursed through the Medicare program, provide in-house care primarily to Medicare patients throughout the state. Three of the firms, Golden Age Home Care Southern Louisiana, Inc., Golden Age Home Care of Monroe, Inc., and Golden Age Home Care of Baton Rouge, Inc., filed for Chapter 11 bankruptcy on February 23, 1998 in the Eastern District of Louisiana. Each of the firms sponsored a retirement plan for its employees, which collectively covered 192 participants. Data available to the department shows that the plans had cumulative assets of $1,122,011 at December 31, 1993.

The Labor Department lawsuit alleges that the defendants violated their fiduciary duties under the Employee Retirement Income Security Act (ERISA) when they:

• made 11 loans from the plans to Southern Style Success — a company wholly owned by Sewell and Herring;

• transferred or loaned $50,000 of plan proceeds from a certificate of deposit to Southern Style Success;

• purchased in 1994 the stock of Golden Goose Enterprises, a firm owned by Sewell and Herring;

• purchased a computer with plan assets which was leased and used by Home Care Center; and

• paid the trustees dual compensation by virtue of trustee fees they received in addition to their compensation as full-time employees of the plans’ sponsors.

The lawsuit seeks a court order to require that Sewell and Herring and the plan trustees be permanently barred from serving as trustees to any ERISA-covered plans and be removed from their positions with the home health care plans. The department also asked the court to require the defendants to reimburse the plans for all losses and to undo any prohibited transactions with the plans.

The lawsuit was filed on May 27 in federal district court in Baton Rouge. This case resulted from an investigation conducted by the Dallas Regional Office of the Labor Department’s Pension and Welfare Benefits Administration into alleged violations of ERISA.

(Herman v. Home Care Center, Inc.)
Civil Action 98-484-A-M-1

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Archived News Release — Caution: Information may be out of date.

Contact Name: Gloria Della
Phone Number: 202.219.8921