Labor Department Sues Executives of Indiana Marketing Firm for Failure to Prudently Manage Health Plan

Archived News Release — Caution: Information may be out of date.

CHICAGO, Ill.—The U.S. Department of Labor sued executives of TRG Marketing, LLC in Indianapolis, Ind., on Oct. 28, for failing to prudently manage the firm’s health plan, resulting in up to $17.5 million in unpaid health claims owed to plan participants nationwide. The suit alleges TRG’s executives also diverted health plan assets to pay personal expenses for themselves and family members.

“The TRG defendants blatantly disregarded the health benefit needs of small business employers and their workers. At a time when employers are finding it hard to obtain health coverage, these defendants schemed to rob small businesses and workers, leaving workers with $17.5 million in unpaid health claims,” said U.S. Secretary of Labor Elaine L. Chao.

The suit alleges that William Paul Crouse and Carmelo Zanfei violated the Employee Retirement Income Security Act (ERISA) when they retained assets of the health plan with those of the marketing firm, failed to charge adequate premiums, and did not establish appropriate underwriting procedures to ensure sufficient assets were available to pay benefits. As a result, participants were left with between $5 and $17.5 million in unpaid medical claims.

The defendants diverted money targeted to pay health benefits for personal enrichment, including paying for European family vacations, personal lines of credit, charitable contributions, brokerage commission and corporate distribution to themselves and spouses.

The suit, which was filed in the federal district court in Indianapolis on Oct. 28, seeks to require Crouse and Zanfei to pay all health claims filed by participants and beneficiaries under the TRG health plan and restore any plan losses with interest, as well as any undue profits received by them. The suit also asks that the defendants undo any prohibited transactions with the plan, be removed from their positions with the plan and permanently barred from serving as fiduciaries to any ERISA-covered plan.

TRG Marketing was a Nevada limited liability company. The TRG planwas a multiple employer welfare arrangement (MEWA) designed to protect participants and their dependents by providing reimbursement for catastrophic health expenses. The plan was funded by premium payments made by employers on behalf of their employees, by employees through payroll deduction, and by individual participants who were not associated with any employers. When terminated in November 2001, the TRG plan had approximately 11,000 participants nationwide.

Employers and workers can reach the Cincinnati regional office at (859) 578-4680, or EBSA’s toll-free number, 1-866-444-3272, for help with problems relating to private-sector pension and health plans. The case was investigated by the Cincinnati regional office of the Labor Department’s Employee Benefits Security Administration.

(Chao v. Crouse)

Civil Action No. 1:03-CV-1585-DFH-TAB

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