Labor Department Obtains Court Order Freezing Assets of Several New York Health Providers

Archived News Release — Caution: Information may be out of date.

New York, New York - The U.S. Department to Labor has obtained a temporary restraining order freezing the assets of U.S. Alliance, Inc. of Long Island City, New York, related companies, corporate executives and plan officials for diverting over $1 million of health plan assets to themselves. The health scheme resulted in more than $2.8 million in unpaid medical claims for at least 1,500 participants.

A hearing on the department's request for a preliminary injunction is scheduled for July 20 at 2:00 p.m. in federal district court for the eastern district of New York in Brooklyn.

The court order also appoints an independent fiduciary to manage the plans' assets, removes the defendants from their positions with the plans and permanently bars them from serving any plan governed by the Employee Retirement Income Security Act (ERISA) David Silverman of Granik, Silverman, Campbell & Hekker, was appointed by the court as the independent fiduciary to conduct an accounting of plan assets.

Named as defendants are Mari Elena Marks, Timothy Marks, Walter Nieves, son Michael Nieves, brother Jesus Nieves, Michele Jenkinson, U. S. Alliance, Inc., International Benefits Association, Inc. (IBA), Alliance Administrators, Inc., Nexus Administration Systems, Inc., Atlantic Liability Actuarial Company, Ltd., and People Care Management, Inc. People Care Management is a successor to U.S. Alliance, Inc.

U.S. Alliance and Alliance Administrators operated numerous membership associations which marketed health and welfare insurance to numerous employers in New York, New Jersey, Maryland and Pennsylvania. The associations purportedly sponsored ERISA covered plans under the names of U.S. Multiplan Alliance, U.S. Alliance Valucare, Mannacare, U.S. Alliance Plan, U.S. Alliance Managed Care Partners. Employers then paid contributions to purchase benefits provided by the various association plans.

U. S. Alliance ceased operations in October 1999. The defendants, however, continue to establish new employee benefit plans. One Maryland-based plan, SAI Plus Health Plan, LLC, is now insolvent.

The Labor Department simultaneously filed suit on July 10 against the defendants in connection with $4.7 million in commissions and fees diverted from payment of benefits. The department alleges that the defendants:

• Transferred plan assets to themselves for their personal use starting in 1997 through May 2000
• Diverted plan assets to themselves in the form of sham membership dues and fees
• Allowed $215,293 in plan assets to be transferred to People Care Management, Inc. and additional amounts relating to Atlantic Liability Actuarial Company, companies owned by the individual defendants
• Caused the plans to become insolvent and subsequently abandoned the plans, leaving participants with unpaid health claims
• Charged the plans unreasonable commissions and consultant fees for services, representing approximately 49% of the contributions paid by employers and participants for health benefits
• Failed to obtain a fidelity bond for plans administered by U.S. Alliance and to file Form 5500 annual reports with the government.

The suit seeks a court order appointing an independent fiduciary to marshal the plans' assets. It also seeks to require that the defendants return all money improperly received by them, undo any prohibited transactions, restore all losses with interest resulting from the alleged violations and post a bond or security against past or future losses by the plans. In addition, the suit asks the court to order various injunctive relief, including permanently removing them from their current positions with the plans, barring them from marketing and creating ERISA plans, and permanently barring them from receiving compensation from plans governed by ERISA.

The court actions resulted from an investigation conducted by the New York Regional Office of the department's Pension and Welfare Benefits Administration into alleged violations of ERISA.

(Chao v. Marks
Civil Action No. CV-014569)

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