U.S. Alleges Fraud by Health Plan in Encino
The U.S. Department of Labor has sued administrators of an Encino-based health care plan for allegedly cheating its members out of more than $1.1 million, department officials said Thursday.
The suit alleges that from March to October in 1992, a “sham union” called Local 555 of the National Council of Allied Employees International Union collected $3.7 million in contributions from more than 3,000 members and paid less than $1.2 million in claims. When the local’s plan ceased operations, it had about $40,000 with which to pay claims but more than $604,000 in unpaid claims in addition to those claims not yet reported, department officials said.
For the record:
12:00 a.m. April 9, 1994 For the Record
Los Angeles Times Saturday April 9, 1994 Valley Edition Metro Part B Page 4 Column 5 Metro Desk 3 inches; 76 words Type of Material: Correction
Wrong Foundation--The National Health Foundation referred to in a story in the Valley Edition of the Los Angeles Times on April 1 is not the National Health Foundation based in Los Angeles. The former was cited in a lawsuit by the U.S. Department of Labor as part of a health-care plan that allegedly bilked contributors out of $1.1 million. The Los Angeles-based NHF, a nonprofit organization located at 201 N. Figueroa St., is not associated with the American Healthcare Underwriting Managers, Inc., and has not been accused of any wrongdoing.
Funds collected by Local 555 were siphoned off by principals of the union and their subsidiary operations under the guise of administrative expenses, said Olena Berg, assistant secretary of Pension and Welfare Benefits Administration, which investigates fraud in union health plans.
A sizable chunk of the premiums collected, more than $700,000, is still unaccounted for, Berg said.
The suit targets “Local 555,” not the union itself, which chartered the local.
The suit, filed Wednesday in U.S. District Court in Los Angeles, seeks repayment of any illegal profits and an order banning those involved in the alleged scheme from having any future involvement with employee benefit plans.
Action against the Los Angeles union coincided with suits against four other health care plans nationwide. The five unrelated plans, the Labor Department alleges, bilked 20,000 workers in at least 14 states.
According to Berg, Local 555 was a phony union set up by the principals of the American Health Care Underwriting Managers, who also set up a nonprofit group called the National Health Foundation.
In addition to diversion of funds, operators of the Encino plan are accused of failing to set contribution rates sufficient to cover the promised benefits; failing to monitor the plan’s accounting, financial and marketing services, and using unlicensed insurance carriers.
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