U.S. Labor Department Sues Former Minneapolis Executives For Health Plan Mismanagement

Archived News Release — Caution: Information may be out of date.

Chicago, Illinois - The U.S. Department of Labor has sued former executives of Riscomp Industries Inc., Minneapolis, Minnesota, for mismanagement of the firm’s health plan that left plan participants and their families with more than $2.1 million in unpaid health claims.

“Workers have been betrayed and saddled with unpaid health claims,” said U.S. Secretary of Labor Elaine L. Chao. “The department will seek legal action to restore monies to the plan so workers and their families can count on their health care benefits in the future.”

The Labor Department suit alleges that Robert Wood, Kurt Wood, and David Nelson violated the Employee Retirement Income Security Act (ERISA) when they retained more than $1.2 million of health plan contributions in the firm’s corporate account. At the time of the violations, the defendants also served as trustees to the health plan.

The suit seeks to require the defendants to restore any losses, including interest; to undo any prohibited transactions with the plan, and to permanently bar the defendants from service as fiduciaries or service providers to any ERISA-covered plan in the future. The suit also asks the court to remove Riscomp as the plan’s administrator; to appoint an independent fiduciary to manage the plan, and to require the former executives to pay the costs of the independent fiduciary. The bankruptcy trustee also agreed to restore $86,000 in assets transferred to Riscomp’s bankruptcy estate.

Riscomp, which operated under the name RJ Associates, was a Minnesota corporation providing professional employer services to clients in 13 states, including Minnesota, Iowa, South Carolina and Wisconsin. The health plan was a multiple employer welfare arrangement (MEWA) that provided medical, dental, life and death benefits to almost 1,800 participants before Riscomp declared bankruptcy. Premium payments were made by client employers and employees through payroll deduction.

The lawsuit, filed in federal district court for the district of Minnesota, resulted from an investigation conducted by the Kansas City regional office of the Labor Department’s Employee Benefits Security Administration (EBSA). Employers and workers can contact the regional office at 816.426.5131 or through EBSA’s toll-free number, 1.866.444.EBSA (3272), for help with problems relating to private-sector pension and health plans. Tips for small employers purchasing health benefits may be found at EBSA’s Web site under www.dol.gov/ebsa/newsroom/fshlthinstips.html.

(Chao v. Wood)
Civil Action No. 0:05-cv-02614-RHK-AJB

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