Labor Department Settles Part of Its Lawsuit With U.S. Alliance Health Care Officials

Archived News Release — Caution: Information may be out of date.

New York, New York - The U.S. Department of Labor has negotiated a settlement with some of the defendants in its lawsuit involving health plans associated with U.S. Alliance, Inc. and International Benefits Association, Inc. of Washington, DC.

The defendants, subject to the consent judgment entered October 23, 2002 in federal district court in Brooklyn, are known as the Nieves defendants and include the above companies as well as Walter Nieves, Michael Nieves and Jesus Nieves.

Under the consent judgment, Walter Nieves is liable for payment of $2.8 million in unpaid medical claims due to at least 1,500 participants in the U.S. Alliance-related health plans because of his fiduciary breaches of the Employee Retirement Income Security Act (ERISA). Under the direction of the previously court-appointed independent fiduciary David W. Silverman of New City, New York, Walter and Michael Nieves will put up for sale real estate located at 300-400 Willow Point Lane in Chester, Maryland, with proceeds of the sale to go into the health plan.

In addition, Walter Nieves agreed that he would pay the plan a percentage of any yearly income in excess of $50,000 he may have for the next 10 years or until the entire $2.8 million is repaid. The judgment also permanently bars the Nieves defendants from operating, providing services to and marketing any employee benefit plan covered by ERISA.

The judgment does not include the Marks defendants (Marie Elena Marks, Timothy Marks, Michele Jenkinson, Alliance Administrators, Inc., Nexus Administrations Systems, Inc. and People Care Management, Inc.) with whom litigation continues.

On July 12, 2001, the department obtained a temporary restraining order freezing the assets of the U.S. Alliance-related companies, corporate executives and plan officials for diverting health plan assets to themselves. The principals of these companies were previously removed from their positions with the health plans and temporarily barred from any involvement with plans governed by ERISA.

The U.S. Alliance-related companies fostered several membership associations that created health plans on the East Coast. The employers paid contributions to purchase benefits provided by the various association plans. A preliminary injunction was subsequently issued which continued the appointment of the independent fiduciary and froze the defendant’s assets.

The associations purportedly sponsored ERISA-covered plans under the names of U.S. Alliance Valucare, Mannacare, U.S. Alliance Plan, U.S. Alliance Managed Care Partners. These U.S. Alliance-related plans ceased operations in October 1999.

The consent judgment results from the Labor Department’s July 10, 2001 suit against the defendants in connection with commissions and fees diverted from payment of benefits. The department alleged 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,
• Caused the plans to become insolvent and subsequently abandoned the plans, leaving participants with unpaid medical claims;
• Charged the plans unreasonable administrative fees, commissions and consultant fees for services, representing approximately 49% of the contributions paid by employers and participants for health benefits, and
• Failed to obtain a fidelity bond for plans administered by U.S. Alliance and to file Form 5500 Annual Reports with the federal government.

“This action demonstrates our commitment to protect the benefits promised to American workers,” said Francis C. Clisham, director of the department’s New York Regional Office of the Pension and Welfare Benefits Administration, which investigated the alleged violations of the ERISA.

Employers and workers can contact the New York Regional Office at 1.212.337.2462 or EBSA’s Toll-Free Employee & Employer Hotline number, 1.866.275.7922, for help with any problems relating to private-sector pension and health plans.

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

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