Labor Department Sues Central Valley Teamsters Health Plan Officials Seeks Payment Of $3.6 Million In Unpaid Health Claims

Archived News Release — Caution: Information may be out of date.

SAN FRANCISCO -- The U.S. Department of Labor is suing the trustees, consultant, and health claims administrator of an employee benefit plan for mismanagement resulting in $3.6 million in unpaid health benefit claims. The plan, the Teamsters Miscellaneous Employees Health and Welfare Trust (TMET), provides health coverage and life insurance to approximately 2,500 workers through employers and unions throughout the Central Valley.

The lawsuit alleges that trustees failed to ensure the plan’s financial solvency and failed to pay benefits while paying excessive amounts to the plan’s consultant, McLaughlin and Associates, Inc., and claims administrator, Claims Benefit Insurance Administrators, Inc. Patrick C. McLaughlin, who serves as president of McLaughlin and Associates and as secretary and treasurer of Claims Benefit Insurance Administrators, is also named.

The Labor Department’s lawsuit alleges that McLaughlin used his positions with the consultant and claims administrator to pay himself approximately $3.6 million, which greatly exceeded the amounts provided in the companies’ written agreements with the plan.

According to the complaint filed today in U.S. District Court in Sacramento, TMET has been operating at a loss since its inception in 1993, and has resorted to obtaining loans to pay claims. As of May 1999, the plan had a cumulative deficit of over $6.5 million, including approximately $3.6 million in unpaid claims.

Trustees Victor L. Shada and Ron Costa and former trustees Toby Louden and Ron Rea are also named in the suit. The complaint alleges that trustees Shada, Costa, Louden, and Rea never consulted with an actuary or other expert to make sure the plan had enough money to pay claims, or to determine whether the plan was offering a higher level of benefits than it could afford, based on the rates charged to employers through collective bargaining agreements. The defendant trustees also allegedly approved or permitted payment of administrative expenses without requiring documentary support and without any meaningful review of payments made.

The Labor Department’s suit seeks payment of past due claims; elimination of the claims deficit; restoration of losses resulting from the breaches of the trustees, McLaughlin, MLA and CBI. It would also remove Shada and Costa from their positions as fiduciaries, and require that the consultant and claims administrator be replaced. The defendants would also be barred from any future roles involving employee benefit plans.

TMET is a multi-employer, collectively-bargained employee benefit plan which provides life insurance, medical, dental, prescription drug and vision benefits for employees of participating employers and unions throughout the Central Valley. As of July 31, 1998, there were 2,480 participants in the plan. The plan is now known as the Pacific States Health and Welfare Trust.

The complaint is the result of an investigation conducted by the Labor Department’s Pension and Welfare Benefits Administration San Francisco Regional Office. It was filed on March 17, 2000, in the United States District Court for the Eastern District of California, Sacramento Division, as Case No. CIV-S-00-0583 LKK/DAD.

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