This third link seems to explain why the two JW elders didn't go to prison. They have agreed to a pay-back plan to those who were defrauded:
Volume 5 Number 6
Wednesday, March 21, 2001 Page 251
ISSN 1521-9755
Court Proceedings
Enforcement
Labor Department Obtains Judgments
Restoring Up to $8 Million to Health Plan
The Labor Department obtained consent judgments Feb. 6 providing for restoration of between $500,000 and $8 million to the International Workers' Guild health plan by the principals of Fidelity Group Inc. and health plan trustees, according to a department news release (Chao v. Fidelity Group Inc., E.D.N.Y., CV-98-7683, 2/6/01).
The judgments also bar the Fidelity Group principals from having any dealings with or receiving compensation from employee benefit plans governed by federal employee benefit law.
According to a department representative, the range for restoration is based on the defendants ability to pay, from full restitution of $8 million to a minimum amount of $500,000. While the department seeks to recover the full amount, if the defendants can prove they do not have the ability to pay the full amount, they must pay what they can but no less than $500,000.
The judgments resolve a lawsuit filed by the Labor Department alleging that nine of the defendants permitted plan assets to be diverted for purposes other than to pay health benefits and underfunded the plan, thereby leaving participants with between $8 million to $28 million in unpaid medical claims, the news release said (3 HFRA 35, 1/13/99).
According to the news release, the plan, created in 1995, was marketed to small employers through consultants, insurance agents, and related professionals.
'Sham Union.'
The department alleged that IWG was a "sham union" which operated the health plan for employers through "bogus" collective bargaining agreements with the National Association of Business Owners and Professionals, a sham "employer association." The plan was administered by Fidelity Group, Inc., of Great Neck, N.Y. At its peak, it had over 10,000 participants in 32 states.
Under the judgment with Eugene Duncan and Dwayne Samuels--the principals of the Fidelity Group--the defendants must each restore $250,000 under a payment schedule and restore annually to the plan 50 percent of their net income over a $50,000 threshold for 15 years, up to an $8 million cap, the news release said.
They also are barred from serving as fiduciaries, receiving compensation, marketing services, and having business dealings with any plan governed by the Employee Retirement Income Security Act.
According to the Labor Department news release, the settlement with Yvonne Duncan and Carol Samuels requires the defendants to restore annually to the plan 50 percent of their net income over a $50,000 threshold for 10 years, up to a $3.8 million cap.
They also are permanently barred from acting as fiduciaries or service providers to any ERISA plan. In addition, separate settlement agreements were obtained with Fidelity Group Inc. and NABOP, which have ceased doing business and turned their assets over to the plan.
Earlier settlements with plan trustees Paul Askew, Charles Bradley, Terence Rhue and Noel Shaw, as well as two Fidelity Group management-level employees, David Spooner and Lee Jarmolowsky, provided various injunctive relief against doing business with ERISA-covered plans.
Original Lawsuit
The department originally filed its lawsuit on Dec. 15, 1998, alleging that the trustees and others violated ERISA when they:
paid excessive administrative fees from health plan assets to Fidelity for its service as the third-party administrator;
diverted assets of the health plan to IWG and NABOP in the form of sham union and association fees;
failed to monitor and administer the fund's claims processing system and adjudication system, thereby resulting in a $25 million backlog of unprocessed health claims;
failed to assure the financial soundness of the plan through the use of adequate underwriting and sound actuarial analysis;
failed to establish adequate contribution rates and maintain cash reserves to assure the payment of claims;
allowed the plan to become insolvent and used plan money for prohibited purposes; and
permitted NABOP and IWG to be created or operated primarily to divert plan assets from the payment of health benefits.
Under a temporary restraining order entered on Dec. 15, 1998, the court removed the plan administrator, Fidelity Group Inc., plan officers Eugene Duncan and Dwayne Samuels, and plan employees Lee Jarmolowsky and David Spooner; NABOP and its officers Yvonne Duncan and Carol Samuels, and the trustees from their positions with the health plan.
The case resulted from an investigation conducted by the New York Regional Office of the Labor Department's Pension and Welfare Benefits Administration into alleged violations of ERISA.
