US Labor Department obtains court order freezing 13 bank accounts allegedly containing assets of welfare benefit plans administered by Bridgeport, Pa.,-based PennMont Benefit Services

BRIDGEPORT, Pa.—The U.S. Department of Labor has obtained a court order freezing 13 bank and brokerage accounts allegedly containing assets of multiple employee welfare benefit plans administered by Bridgeport-based PennMont Benefit Services Inc. The accounts include bank accounts in the name of plan trustee Penn Public Trust, plan fiduciary John J. Koresko V and the Koresko Law Firm.

The order issued by the U.S. District Court for the Eastern District of Pennsylvania, followed a July 8 hearing. At that hearing, the court heard arguments regarding the appropriate form of interim relief pending an evidentiary hearing that is currently scheduled for Aug.12 on the department’s Application for a Temporary Restraining Order and Preliminary Injunction.  That application was aimed at preserving the assets of the welfare benefit plans sponsored by employers nationwide, and was filed in an ongoing lawsuit brought by the department in 2006 against PennMont, Penn Public Trust, John J. Koresko V, his law firm and other defendants. The 2006 complaint alleged violations of the Employee Retirement Income Security Act.

According to the court’s July 8 order, the department and private litigants established a substantial likelihood of success on the merits of their claim that the Koresko parties-- John J Koresko V, PennMont Benefit Services, Inc., Penn Public Trust, Koresko Law Firm PC, and Koresko and Associates PC-- breached their fiduciary obligations to the ERISA plans being administered by them. The court also found that the department and the private litigants have a substantial likelihood of showing that the Koresko parties engaged in a pattern of moving plan assets, in the form of death benefit and insurance policy loan proceeds, through at least 28 different bank accounts, held in the name of at least 19 different entities, at no fewer than four banks; commingled plan assets with other funds; and misappropriated funds from those commingled accounts for their own benefit. 

In addition, the court found that the department and private litigants have a substantial likelihood of showing that the Koresko parties used plan assets to pay Koresko and his law firm for services to the trust, and that Koresko, by acting as both the fiduciary and a service provider to the trust, who also appeared to set his own rates for his services, placed himself in the position of dual loyalties that ERISA prohibits. The district court had previously held that ERISA applied to certain employer-level plans that participated in the trust, and that the funds held in the trust were plan assets. 

The July 8 order freezes all funds in the 13 accounts until further order of the court, but authorizes PennMont and Penn Public Trust to pay premiums on life insurance policies out of one of the accounts.

The department’s lawsuit was filed by the Philadelphia Regional Solicitor’s Office.

Employers and workers can reach EBSA’s Philadelphia office at 215-861-5300 or toll-free at 866-444-3272 for help with problems relating to private-sector retirement and health plans. Additional information can be found at www.dol.gov/ebsa.

Harris v. Koresko
Civil Action Number 2:09 – cv-00988

U.S. Department of Labor news materials are accessible at www.dol.gov. The information above is available in large print, Braille, audio tape or disc from the COAST office upon request by calling 202-693-7828 or TTY 202-693-7755.