Labor Department Sues Trustee and Others for Diverting More Than $2.2 Million of New York Health and Welfare Plan

Archived News Release — Caution: Information may be out of date.

New York, New York - The U.S. Department of Labor sued the trustees, corporations and their principals affiliated with the Mutual Employees Benefit Trust (MEBT) for diverting more than $2.2 million in assets of the Huntington, New York-based health and welfare plan to benefit sham labor unions and corporations.

The suit, filed November 15 in federal district court in Brooklyn, New York, names as defendants: Leonard Slutsky, his wife Sharlene Slutsky, and plan trustees Leonard Mandelbaum, Tom Perez, Jack Neiman and Adena Samowitz. Corporate defendants include third-party administrator Mutual Association Administrators, Inc. (MAA); Financial Consultant Guild of America and union locals American Employees Industrial Guild Local 1 and American Employees Industrial Guild Local 2; the New York Small Business Network (NYSBN), Netscor, Inc. (Netscor); VCT Financial Services, Inc. and Marketing Motivation Associates, Inc. MAA, which was owned by Sharlene and Leonard Slutsky, and provided third-party plan administration services to the plan. MEBT is a multiple employer welfare arrangement that has provided group health and other welfare benefits to as many as 1,912 participants.

Since 1996 the defendants diverted more than $2.2 million in plan assets to the unions, NYSBN and Netscor in the form of sham union and association fees. The suit also alleges that Leonard Shutsky, who was previously convicted on criminal charges, was allowed to serve as a fiduciary to MEBT. The Employee Retirement Income Security Act (ERISA) bars persons who are convicted on certain criminal charges from serving as fiduciaries to any plan governed by the federal pension law.

As a relief, the suit seeks a court order requiring the defendants to restore to MEBT all diverted assets and losses with interest, be removed from their positions as fiduciaries and to permanently bar them from managing or receiving compensation from any ERISA plan in the future. The department also asks the court to appoint an independent fiduciary to manage the plan and to require an accounting of plan assets.

“Our goal is to ensure that consumers know that the department is committed to protect the benefits promised by employers,” said Francis Clisham, director of PWBA’s New York Regional Office. “Employers and workers can reach us at 212.337.2228 for help with any problems relating to private-sector pension and health plans.”

The case resulted from an investigation by the New York Regional Office of the Pension and Welfare Benefits Administration into alleged ERISA violations.

(Chao v. Slutsky
Civil Action No. 01-7593 (ADS)(TB))

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