Trial Begins in $1.5-Million Union Health Fund Embezzlement Case

An Encino man and three Orange County residents went on trial in federal court Wednesday on charges of embezzling $1.5 million from a Long Beach Teamsters Union health plan fund.

Government prosecutors allege that the defendants forced the fund into receivership, leaving thousands of unpaid medical bills when it collapsed in 1982.

Matthew W. McCusker of Encino, who was the trust administrator, is accused of embezzling more than $600,000 for himself and others from 1979 to 1981.

Dana and Nicholas Nicholson of San Clemente and Elwyn L. Raffetto of Huntington Beach are charged with looting the Western Conference Benefit Trust in those years. All three worked for the trust and various companies involved in managing and marketing its programs. McCusker is accused of diverting $64,900 to Raffetto.

Established in 1974, the health and benefit plan served members of Teamsters Local 911 in Long Beach and had collective-bargaining agreements with school districts, cities and parking lot companies, among others.

Assistant U. S. Atty. Leon W. Weidman told the jury that the defendants misrepresented the financial condition and size of the trust to prospective members. In 1979, the defendants claimed the trust had $34.5 million in contributions, when the total was only $1.1 million, Weidman said. He said the total membership was 3,692 but that the defendants claimed membership of 200,000 to 300,000.

“The people never would have signed on to the plan if they knew the true numbers,” Weidman said in his opening statement. “After defrauding these people, the defendants proceeded to loot the plan.”

He said the Nicholsons, who operated a management company called Far West Administrators, received about $552,000 from the trust and its subsidiaries. Some of the money was used for a down payment on a home, he said.

The 52-count grand jury indictment handed down in January also named Gordon and Sharon Eldredge of Malibu, who have since become fugitives. The indictment accused Gordon Eldredge of embezzling $965,558, including $469,560 allegedly paid to Nicholas Nicholson. The pair marketed the trust program for employee groups through a company named Westwide Financial Services.

Alva Dotson Bennett, the former secretary-treasurer of Local 911 and chairman of the trust, pleaded guilty last year to embezzling about $130,000 from the trust. He has not been sentenced.

U. S. Dist. Judge Mariana R. Pfaelzer told the jury that this was a “major case” expected to last for four to six weeks.