Court Orders New York Union Trustees to Pay $570,000, Resolve ERISA Violations, After U.S. Department Labor Investigation and Litigation

NEW YORK, NY – The U.S. District Court for the Eastern District of New York has ordered the trustees of four benefit plans for United Derrickmen & Riggers Association, Local Union 197, in Long Island City, New York, to restore $475,000 to the plans, pay a $95,000 penalty to the U.S. Department of Labor and take other corrective actions to resolve violations of the Employee Retirement Income Security Act (ERISA). The action follows an investigation by the Department’s Employee Benefits Security Administration (EBSA) and litigation by the Department’s Office of the Solicitor.

EBSA investigators found that in 2013, the trustees voted to allocate many of the union’s overhead costs – including salaries, rents, audits and other miscellaneous costs – to the union’s welfare, pension, annuity and apprenticeship training plans. This expense sharing involved prohibited transactions, self-dealing and other ERISA violations by the union and its trustees, and caused the plans to pay substantial expenses that the union should have incurred. In January 2020, the Department filed suit to recover losses to the plans caused by the defendants’ ongoing ERISA violations, end those violations and prevent their recurrence.

In addition to the payment, the consent judgment prohibits the plans from transferring money to Local 197 to pay the union’s rent, overhead expenses and to pay any salary for any person serving simultaneously as a Local 197 employee and fiduciary to any of the plans. It also requires the trustees to enter into separate leases for any space they occupy in Local 197 offices. The plans may reimburse Local 197, in compliance with Title I of ERISA, for reasonable expenses for necessary services performed by non-fiduciary shared employees for the benefit of each plan, per an approved annual reimbursement schedule.

“This judgment rectifies these violations, restores monies to their proper place in the plans and ensures independent approval of any shared expenses in the future,” said Employee Benefits Security Administration Acting Regional Director Thomas Licetti in New York. “Fiduciaries must work solely in the interest of employee benefit plans and their participants, and manage those plans in accordance with federal laws.”

“The results of this case illustrate the U.S. Department of Labor’s commitment to taking effective and appropriate legal action to ensure that plan fiduciaries act and manage their activities solely in the interests of plan participants,” said the Department’s Regional Solicitor Jeffrey Rogoff in New York.

EBSA’s New York regional office investigated and the Regional Solicitor in New York litigated on the Department’s behalf.

ERISA requires fiduciaries operate employee benefit plans solely in the interest of participants and beneficiaries. Employers and workers can reach EBSA toll-free at 866-444-3272 for help with problems related to private sector retirement and health plans.

EBSA’s mission is to assure the security of the retirement, health and other workplace related benefits of America’s workers and their families. EBSA accomplishes this mission by developing effective regulations; assisting and educating workers, plan sponsors, fiduciaries and service providers; and vigorously enforcing the law.

The mission of the Department of Labor is to foster, promote and develop the welfare of the wage earners, job seekers and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.

Scalia v. William D. Hayes; Christopher Gorman; Martin Sanders; Thomas Wilson; Carole Raftrey; Frank Mizerik; Marco Berardi; Jeremy Moses; Anthony Vespa; Estate of Lawrence Weiss; and United Derrickmen & Riggers Association, Local Union No. 197.

Case No. 20-CIV-00578 (ILG)(CLP)