What Are the Penalties in EBSA Investigations (DOL)
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Investigations of Employee Benefit Plans
The Department of Labor, through the Employee Benefit Security Administration (EBSA), oversees and regulates employee benefit plans. All employee benefit plans – retirement plans, healthcare plans and multiemployer plans are subject to regulation by the EBSA. If the EBSA detects fraudulent activity occurring within an employee benefit plan, it can bring criminal enforcement actions against individuals responsible for the fraud. Fraud within an employee benefit plan can take several forms, the most common types are listed below:
- Theft from an employee benefit plan
- Diversion of monies from an employee benefit plan
- Creating fraudulent reports regarding an employee benefit plan
- Submitting false bills under a healthcare benefit plan for services that were not performed
- Embezzlement from an employee benefit plan
- Fraudulently stealing personal information from an employee benefit plan
Generally speaking, criminal activity within an employee benefit plan is carried out by CEOs, executives, trustees and plan administrators. However, any individual who accesses plan information and plan assets and subsequently uses that information or money for a fraudulent purpose is subject to the EBSA’s criminal enforcement power. Below are summaries of recent criminal enforcement actions carried out by the EBSA.
A Summary of Recent DOL-EBSA Cases
- A former president of a technology consulting company was sentenced to two years in prison for embezzling from his company’s 401(k) plan for its employees. The former president was supposed to contribute almost $130,000 to the 401(k) he withheld from his employees’ paychecks, but instead converted that money for his own use on personal expenditures.
- A former manager for a company’s 401(k) plan was forced to pay $87,000 in restitution for monies he illegally stole from the 401(k) plan he managed. Also, as a result of the criminal enforcement action against him, the former manager is forever barred from serving as a fiduciary for any employee benefit plan.
- A former trustee of a pension benefit plan was sentenced to one year of probation for his role in defrauding the pension plan. The former trustee had access to the pension plan and withdrew over $66,000 from the plan for which he used for personal expenditures. The former trustee also had to pay $237,000 in restitution based on his violations of criminal statutes.
- A former office manager for a medical office was sentenced to 37 months in prison for embezzling money from the office’s employee retirement plan. The office manager was responsible for depositing employee retirement plan elections into the office retirement account, but instead kept the money for his own personal use. In total, the former office manager stole $126,000 from the retirement plan’s beneficiaries.
- A former founder of a medical clinic was sentenced to 27 months in prison for her role in defrauding an employee health benefit plan. The former founder used stolen personal information from her clinic’s employees to bill insurance companies for medical procedures that were never actually performed. Some of the billed procedures were paid by a welfare health benefit program. As a result of this scheme, this welfare health benefit program paid thousands of dollars for the false claims.
- A former coordinator for a health benefit plan company was sentenced to ten months in prison for his role in diverting funds away from beneficiaries’ health benefit accounts. The former coordinator was responsible for depositing employee payments for health insurance union dues into a business account, but instead kept these payments and used the monies for his personal use. In total, the former coordinator was responsible for embezzling more than $100,000. In addition to his prison time, the former coordinator will have to pay restitution.
- An individual was sentenced to spend 161 months in prison as a result of his role in a scheme that defrauded Medicare. The individual stole personal information from unsuspecting Medicare eligible beneficiaries and used this information to submit claims to Medicare for medical services that were never performed. In an effort to further the scheme, the individual also stole provider numbers from retired physicians and submitted the fraudulent claims for services under the physician’s NPI numbers to make the claims appear legitimate. As a result of the scheme, Medicare paid $1.6 million for the fraudulent claims. In addition to his prison sentence, the individual will have to pay $1.6 million to Medicare as restitution.
- A former business owner was sentenced to 150 months in prison for fraudulently diverting money away from his employees’ corporate investment account. The former business owner started an investment plan for his employees where the employees would allocate a portion of their paychecks to be deposited into the investment account. The former business owner did not deposit the allocated funds from his employees’ checks, but instead kept the money and used it for his own personal expenditures. The former business owner, in addition to his prison sentence, was ordered to pay over $5.7 million in restitution to his employees.
- A former director of a benefits administration company was sentenced to 46 months in federal prison for his role in fraudulently converting employee benefit plan monies to his own use. The former director stole over $3 million from individual health reimbursement accounts that were under management by his company. In addition to his prison sentence, the former director will also have to pay over $3 million to the individuals affected by his theft from the health reimbursement accounts.
- A physician pleaded guilty in federal court for his role in making false statements in order to receive reimbursement from healthcare plans. According to the plea agreement, the physician would embellish the seriousness of medical conditions his patients had in order to receive payment for treatment of those conditions. The physician admitted payment for services based on those conditions would not have been reimbursable if the physician did not overstate the seriousness of the conditions. As part of the plea agreement, the physician must pay back over $75,000 to private insurance companies who paid the claims submitted by the physician based on the fraudulent claims.
- A former head of a union pleaded guilty for his role in fraudulently obtaining unemployment benefits. The former union head under-reported his earnings in order to obtain unemployment benefits to which he otherwise would not have been entitled based on his full-time employment. As a result of his scheme, the former union head received over $40,000 in unemployment compensation.
- A former executive of an entertainer’s union pleaded guilty for his role in a scheme involving tax fraud. According to the plea agreement, the former executive filed a false tax return in which he failed to report income the union received from various contract workers. In total, the former executive failed to report over $450,000. In addition to possible prison time stemming from his plea agreement, the former executive will have to pay restitution to the IRS.
- A former member of a dockworker’s union was found guilty by a federal jury for his role in defrauding the union’s healthcare benefit program. According to evidence presented at trial, the union member, along with a chiropractor, opened medical clinics and paid money to other union workers to have services provided at the medical clinics. The services provide at the clinics were not medically necessary and were subsequently billed to the union’s healthcare benefit plan for reimbursement. The proceeds received from the submission of the fraudulent claims were split between the former union member and the chiropractor.
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