Labor Department Obtains Order Freezing Assets Of Third-Party Administrators

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor today obtained a preliminary injunction freezing the assets of third-party administrator Administrative Services of Texas, Inc. of Houston, its parent Administrator Services of North America and a former corporate executive to prevent further depletion of the assets of client welfare plans whose accounts were held by them.

The order also appoints Jack M. Webb as the independent fiduciary with authority to operate the plans.

The department also simultaneously filed a lawsuit against the company, its parent and former corporate executive Mark A. Strange. The defendants were alleged to have violated the Employee Retirement Income Security Act by using the assets of client plans for the benefit of Administrative Services of Texas and Strange.

According to the lawsuit, Strange signed and authorized $1,027,188 through a series of transfers from plan trust accounts to corporate accounts between Oct. 29, 1998 and March 3, 1999. Approximately $305,220 was wired back into the trust accounts leaving a shortfall of $721,968.

The lawsuit also alleges that the defendants transferred approximately $508,400 of plan assets from refund payments from service providers and COBRA payments which were not properly forwarded to the plans’ trust accounts, but were instead used to pay operating expenses of defendants ASONA and ASO Texas.

In addition, Strange allegedly diverted some $332,700 in plan trust funds for his own personal expenses including down payment on a Jaguar, payment of a personal car note, payment on a $100,000 personal bank loan and American Express credit card charges.

The lawsuit asks that defendants restore to the plans the lost money, plus interest, be removed from their positions and be barred permanently from acting as fiduciaries to the plans and any other employee benefit plan covered by ERISA.

Administrative Services Texas provided various services for self-funded insurance plans sponsored by a variety of employers. Of the 38 plans served by the company, the Dallas Regional Office of the Pension and Welfare Benefits Administration estimated that a majority of the plans affected by the defendants’ alleged misdeeds were governed by ERISA. The preliminary injunction was signed today in federal district court in Houston.

Bruce Ruud, regional director of the five-state region headquartered in Dallas, Texas, praised the cooperative efforts of the Texas Attorney General’s office, the Texas Department of Insurance and Department of Labor investigators for their hard work and dedication. He adds that persons who feel there may be problems in their benefit plans should call his office at 214- 767-6831.

(Herman v. Administrative Services of North America, Inc. et al.)
Civil Action No. H-99-1793

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

Contact Name: Diana Petterson or Beverly Sepulveda
Phone Number: 214 .767.4777 ext. 222 or ext. 221
Contact Name: Sharon Morrissey
Phone Number: 202.219.8921