US Department of Labor sues former hospital CEO who failed to forward plan contributions, caused cancellation of employees’ health insurance

WILLIAMSON, WV – The U.S. Department of Labor has taken legal action after an investigation by its Employee Benefits Security Administration found the former CEO of a West Virginia hospital, who was a fiduciary of the company’s healthcare plan, failed to forward contributions to the plan. This led to the plan’s cancellation and left participating employees with a significant number of unpaid claims – and without health coverage.

Filed in U.S. District Court for the Southern District of West Virginia, the department’s suit seeks to restore all losses incurred by former employees of Williamson Memorial Hospital LLC in Williamson, West Virginia, as a result of fiduciary breaches by Charles Hatfield. The rural, 76-bed hospital filed a bankruptcy petition on Oct. 21, 2019.

“Fiduciaries have a legal obligation to operate employee benefit plans solely in the interest of participants and beneficiaries,” said Employee Benefits Security Administration Acting Regional Director Cristina O’Brien in Philadelphia. “We will hold them accountable whenever they fall short of that obligation.”

The court action follows an investigation that found – from at least July 1, 2018 through Oct. 31, 2019 – Williamson Memorial Hospital offered a self-insured health plan to provide medical benefits to full-time employees and their eligible dependents. The plan was funded by employee payroll deductions and employer contributions. Investigators determined that while acting as plan fiduciary, Hatfield withheld voluntary employee premium contributions and failed to forward them to the plan for payment of medical costs incurred by the employees.

EBSA learned that, despite warnings to Hatfield from the plan administrator about nearly constant funding concerns and the danger of the plan’s termination, the former hospital CEO and fiduciary did not notify employees that their coverage was in jeopardy. Hatfield also failed to alert employees that a significant amount of healthcare claims were unpaid and that the provider ultimately canceled their contract and stopped processing claims on Oct. 31, 2019. Unaware of the cancellation, employees continued to incur unpaid medical expenses until Dec. 11, 2019, when they were notified of the termination of their health plan.

“The U.S. Department of Labor is committed to protecting the employment benefits earned by America’s workers, and we will aggressively pursue and hold legally accountable those that fail to fulfill their fiduciary obligations and misuse ERISA-protected health plan assets,” said Regional Solicitor Oscar L. Hampton III in Philadelphia.

The violations of the Employee Retirement Income Security Act prompted the department’s filing, which also seeks that Hatfield be removed permanently as fiduciary and barred from serving in a fiduciary capacity to any ERISA-covered employee benefit plan.

EBSA’s office in Washington, D.C. investigated the case, and the Philadelphia Regional Solicitor’s office is litigating the case.

Employees and workers can reach EBSA toll-free at 866-444-3272 for help with problems related to private sector retirement and health plans.                          

Walsh v. Hatfield et. al.

Civil Action Number:  2:22-cv-00371