Investigation returns $39.8M to more than 400 benefit plans nationwide

Judge orders restitution and bars defendants as fiduciaries, service providers to ERISA-covered plans.

BRIDGEPORT, Pa. — After nearly six years of litigation, a federal district court in Philadelphia recently entered a $39.8 million judgment, protecting the rights of workers who participated in more than 400 death benefit plans mismanaged by John J. Koresko V; companies he controlled; and a former associate, Jeanne Bonney. The defendants are permanently barred from serving as fiduciaries to any employee benefit plan and, with the exception of Bonney, must make restitution to the plans.

The decision follows a 2009 lawsuit filed by the U.S. Department of Labor. The judge ruled that Koresko of Bridgeport, Pennsylvania, and other defendants diverted tens of millions of dollars in plan assets through more than 21 accounts using more than 18 different entities at more than eight different banks. Spanning more than 12 years, the scheme saw assets from the plans' trusts, used for real estate purchases in South Carolina and the Caribbean island of Nevis, to pay outside attorneys, lobbying expenses, operational expenses of Penn-Mont Benefit Services, Inc., and Koresko's law firms, and for Koresko's personal expenses, such as boat rentals and utilities. The misuses of assets violate the Employee Retirement Income Security Act.

"The defendants completely disregarded the duty of loyalty they owed to the employee benefit plans and the workers who rely on them," said Assistant Secretary of Labor for Employee Benefits Security Phyllis C. Borzi. "In an ideal world, this does not happen. When it does, there is justice in undoing this massive fraud, and in banning the defendants from coming anywhere near employee benefits again."

The plans primarily provided death benefits to participants nationwide and were established in connection with Koresko's Regional Employers' Assurance Leagues Voluntary Employees' Beneficiary Association and Single Employer Welfare Benefit Plan.

The court found that Koresko and the following defendants transferred plan assets out of the plans' trusts, in violation of ERISA:

Penn-Mont Benefit Services, Inc., of Bridgeport, which is owned by Koresko;

Koresko's current and former law firms;

Jeanne Bonney, an attorney formerly associated with the law firms; and

Penn Public Trust, a company controlled by Koresko.

Nearly $20 million of the amount due to the plans is frozen in accounts under the control of an independent fiduciary, after a July 2013 court order. Announced on Feb. 6, the decision found the defendants, with the exception of Bonney, liable for $19,852,114 in restitution for losses and disgorgement of profits, which represents the remaining balance of the total diverted assets.

The suit and all subsequent legal proceedings, including a June 2014 trial, resulted from an investigation by Jocelyn Diaz-Sweeting, Brannon Ottley, and Michael Horton in the Philadelphia Regional Office of the department's Employee Benefits Security Administration. The case was litigated by Linda M. Henry, Ashton Phillips, and Joanne Roskey in the Philadelphia Regional Office of the Solicitor.

Employers and workers can reach EBSA's Philadelphia office at 215-861-5300 or toll-free at 866-444-3272 for help with problems relating to private-sector retirement and health plans. In FY 2014, EBSA recovered $599.7 million for direct payment to employee benefit plans, participants and beneficiaries. Additional information can be found at http://www.dol.gov/ebsa/.

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Perez v. Koresko, et. al
Civil Action No.: 2:09-cv-00988-MAM

Source: Department of Labor