U.S. Labor Department Obtains Judgment Against Sham Florida Union for Payment of $11 Million in Health Benefits

Archived News Release — Caution: Information may be out of date.

Atlanta, Georgia - The U.S. Department of Labor has obtained a judgment requiring the Service and Business Workers of America Local 125, located in Juno Beach, Florida, to pay $11 million in unpaid health claims owed to union members and their families. The judgment also bars the union from service as a fiduciary to any employee benefit plan in the future.

"This union local was a sham organization running a scheme that preyed on workers needing health care benefits," said Secretary of Labor Elaine L. Chao. "Our legal action in this case will restore money owed to the plan so that these workers and their families can count on their health care benefits in the future."

Under the order, the union local must transfer all its assets to the health fund. In addition, the court-appointed independent fiduciary has authority to recover any assets available through various liability insurance policies.

The Labor Department sued October 2, 2002, alleging the union violated the Employee Retirement Income Security Act by mismanaging the fund, failing to establish actuarially sound premiums and not maintaining adequate stop-loss insurance to pay health benefits. As a result, the health plan was left with more than $11 million in unpaid health claims.

Local 125 allegedly was a sham union that marketed health benefits to employers. At one time, the fund covered more than 3,700 participants in 41 states nationwide. States with the greatest volumes of unpaid claims are Illinois, Indiana, Missouri and Louisiana.

The judgment, entered in federal district court for the southern district of Florida, resulted from an investigation conducted by the Atlanta regional office of the Employee Benefits Security Administration (EBSA). Employers and workers can contact the regional office at 404.562.2156 or 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 http://www.dol.gov/ebsa/newsroom/fshlthinstips.html.

(Chao v. Service and Business Workers of America Local 125)
Civil Action No. 02-80945-CIV-Marra/Seltzer

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Archived News Release — Caution: Information may be out of date.