Ohio Businessman Sued For Misusing Corporate Health Plan

Archived News Release — Caution: Information may be out of date.

The U.S. Department of Labor has sued the owner of TennOhio Transportation Co., Columbus, Ohio for failure to pay $242,986.06 in outstanding medical claims to employees of the company and its three affiliates and instead using the plan’s assets to pay personal and corporate expenses.

According to the lawsuit, TennOhio and other employers participating in the plan withheld $100,870 from the paychecks of employees to pay their portion of the premium for medical coverage. The employers were to pay any benefit claims and administrative expenses in excess of the contributions by employees from corporate general assets.

The lawsuit alleges that John Armstrong violated the Employee Retirement Income Security Act when he:

• failed to pay $242,986.06 in outstanding benefit claims over the period May 5, 1997 to August 25, 1997. These claims have never been paid by the plan or participating employers;
• failed to take steps to obtain payment of outstanding medical claims owed to employees, which resulted in personal liability for employees by medical service providers; and
• caused the plan’s corporate sponsors to pay him excessive salary, payments for lease of a building he owned and numerous personal expenses -- for such “perks” as use of the corporate airplane, yachting expense, and membership in a golf club — while at the same time the companies did not pay medical benefits of employees.

Armstrong was the president of TennOhio and a majority owner of the three related companies. The plan, sponsored by TennOhio, provides health, dental, vision, prescription drug, life and accidental death and dismemberment benefits to employees of TennOhio and its affiliates Marpam Truck and Trailer Company, Garland Transportation Company, and Commercial Trailer Company.

The lawsuit seeks a court order to require that Armstrong return any excessive compensation from TennOhio and its affiliates and to appoint an independent fiduciary to pay medical claims owned by the plan.

Joseph Menez, Director of the Cincinnati Regional Office of the Pension and Welfare Benefits Administration (PWBA), said, “This case exemplifies our commitment to protect the hard-earned benefits of workers. Workers can help us protect their plan benefits by contacting our office at (859) 578-4680 if they have questions or suspect abuse of their pension, health or other benefit plans.”

The lawsuit, filed on Aug. 17 in federal district court in Columbus, Ohio, resulted from an investigation by the Cincinnati Regional Office of the PWBA into alleged violations of ERISA.

Herman v. Armstrong

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