LawFuel.com – Legal News
PREET BHARARA, United States Attorney for the Southern
District of New York, MARJORIE FRANZMAN, Special Agent-in-Charge
for the New York Regional Office of the United States Department
of Labor, Office of Inspector General (“DOL-OIG”); JONATHAN KAY,
Regional Director for the New York Regional Office of the United
States Department of Labor, Employee Benefits Security
Administration (“DOL-EBSA”); and PATRICIA J. HAYNES, Special
Agent-in-Charge for the New York Field Office of the Internal
Revenue Service, Criminal Investigation Division (“IRS”),
announced that MELISSA G. KING was arrested yesterday on charges
of embezzling tens of millions of dollars from the employee
benefit plans she administered on behalf of the Compressed Air
and Free Air Foundations, Tunnels, Caissons, Subways, Cofferdams,
Sewer Construction Workers Local 147 of New York, New Jersey
States and Vicinity AFL-CIO (“Local 147”). KING was arrested at
her Irvington, New York residence by DOL-OIG and IRS agents.
According to the Complaint unsealed yesterday in
Manhattan federal court:
Local 147, which had approximately 1,000 members as of
2008, represents workers employed in numerous construction
projects in the New York City area. The union, and the employers
with whom the union has collective bargaining agreements, have
established plans that provide various employment-related
benefits to Local 147’s members, including pension annuities,
workers’ compensation, vacation, and other benefits. These plans
include the Local 147 Construction Workers Retirement Fund; the
Local 147 Construction Workers Annuity Fund; and the Local 147
Construction Workers Additional Security Benefits Fund (“ASB
Fund”), which provides severance, vacation, unemployment,
workers’ compensation, unreimbursed medical expenses, and death
benefits (collectively, the “Local 147 Funds”).
KING provided administrative services to the Local 147
Funds through the company that she controls, King Care LLC (“King
Care”). Among other things, KING, through King Care, was
responsible for undertaking various administrative tasks on
behalf of the Local 147 Funds, such as collecting employer
contributions, maintaining bank accounts, determining eligibility
for benefits, paying claims to beneficiaries, filing reports with
regulators, maintaining a general ledger of the funds’ income and
expenses, and providing reports to the funds’ trustees. Since
2002, KING had written agreements with Local 147, which provided
that King Care was to be paid up to $15,000 per month for each of
the Local 147 Funds — for a total of $45,000 per month for the
three Funds, and a total of $540,000 annually. The agreements
further provided that King Care might bill the Local 147 Funds
for hiring staff and for expenses related to King Care’s
services.
However, between 2002 and 2008, KING caused at least
$42 million to be transferred, in the form of checks, from the
bank accounts of the Local 147 Funds into a bank account
controlled by King Care (the “King Care Account”). The
approximate amounts of the transfers per year are detailed below:
YEAR TOTAL
(Approximate)
2002 $1,040,000
2003 $3,175,000
2004 $4,205,000
2005 $5,426,040
YEAR TOTAL
(Approximate)
2006 $7,677,192
2007 $11,240,000
2008 $9,845,000
TOTAL $42,608,232
Moreover, between 2002 and October 2009, tens of
millions in embezzled funds were transferred out of the King Care
account through check, wire transfers, and other means in
transactions that appear unrelated to the Local 147 Funds. These
transactions included at least: $7 million paid to American
Express; $3 million paid to various entities that sell, maintain,
and transport horses; $700,000 paid to a diamond company;
$500,000 transferred to E-Trade Securities; $300,000 paid to
Neiman Marcus; $150,000 paid to the Ritz Carlton Palm Beach; $10
million transferred to other bank accounts held by King Care; and
$600,000 transferred to the “Trust Agreement between Jerome and
Mabel King.”
KING’s contract with the Local 147 Funds was terminated
as of December 31, 2008.
KING, 58, is charged with one count of theft and
embezzlement in connection with employee benefit plans, and eight
counts of money laundering. If convicted, KING faces a maximum
sentence of five years in prison on the embezzlement count, and
10 years in prison on each of the eight money laundering counts;
all nine counts also carry a maximum fine of $250,000, or twice
the gross gain or loss from the offense.
KING was presented yesterday in Manhattan federal court
before U.S. Magistrate Judge KEVIN NATHANIEL FOX and released on
a $10 million bond.
U.S. Attorney BHARARA stated: “Employees work hard for
their benefits and depend on plan administrators to be
caretakers, not thieves. These charges bespeak a massive alleged
betrayal of trust. They also demonstrate this Office’s
commitment to holding accountable those who line their pockets by
looting the benefit funds of hardworking people.”
DOL Acting Inspector General DANIEL R. PETROLE stated:
“Third Party Administrators who threaten the integrity of the
employee benefit plans of hard-working Americans will be
thoroughly investigated. My office is committed to working with
the U.S. Attorney and our law enforcement partners to vigorously
protect participant employee benefit plan funds.”
“The theft of tens of millions of dollars in employee
benefit assets jeopardizes the retirement security of
approximately 1,000 union workers and their families. This
alleged crime is particularly egregious in light of the duty that
plan officials and service providers have to protect plan assets
from abuse,” said PHYLLIS C. BORZI, Assistant Secretary of the
Employee Benefits Security Administration.
Mr. BHARARA thanked DOL-OIG, DOL-EBSA, and IRS for
their outstanding investigative work, and said that the
investigation is continuing.
This case is being prosecuted by the Office’s Complex
Frauds Unit. Assistant United States Attorneys JOSEPH P.
FACCIPONTI and JASON HERNANDEZ are in charge of the prosecution.
The charges contained in the Complaint are merely
accusations and the defendant is presumed innocent unless and
until proven guilty.
09-396 ###
