Recently, the Department of Justice (“DOJ”) announced that Paul S. Peters (“Peters”), the former president of the Waterfront Guard Association Local 1852, I.W.A., pleaded guilty to embezzling funds from the union and the from the union welfare and pensions plans.
According to the plea agreement, from January 2002 through September 2005, Peters embezzled funds from the union’s pension and welfare plans and from its operating account. The money was used for personal expenses and purchases, including vehicles, boarding costs for horses, home improvements, stock transactions and home mortgage payments. As part of the scheme, Peters would transfer funds from the pension and welfare plans to the union operating account and then either withdraw the money directly from the operating account or write checks from the account payable to him. To help conceal his embezzlement, Peters misrepresented the purposes of the transactions through various documents. He faces a maximum of five (5) years in prison each for embezzlement from a labor union and an employee benefit plan.
Whether an employer sponsors an insured or self-insured welfare plan (i.e. medical or disability) or qualified retirement plan (401(k)), this criminal case highlights the need to ensure that no one employee is permitted to manage and oversee plan administration and accounts. Periodically, employers must review check writing authority and limits, reconcile bank accounts, ensure timely contributions of employee medical and retirement plan contributions and conduct plan audits to prevent fraud and/or detect it early.