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Release Date: 08/10/2001
Release Number: V-460
Contact Name: Sharon Morrissey
Phone Number: 202.219.8921
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Chicago, Illinois - The
U.S. Department of Labor obtained a consent order today in its lawsuit
against officers of Decatur, Illinois-based Kelly Food Products, Inc. for failing to
pay $81,382 in health claims from monies forwarded for that purpose by the
plan's stop-loss insurer. |
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Defendants Donald
Schumacher, former chief executive officer of the company, and his wife, Susan
Bolin, also a former officer and director, renounced any claims they may have
against the plan. Schumacher was ordered to pay $46,382.57 in addition to the
$35,000 he already paid to a local hospital that provided health care to persons
covered by the Kelly Food Products plan. |
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According to the
lawsuit, filed June 3, 1999, a check from the plan's stop-loss insurance
provider covering medical treatment costs for a plan beneficiary was deposited
to the account of Kelly Food Products
instead of the company's self-funded health plan. A check submitted to the
local hospital was returned twice for insufficient funds, leaving the claim
unpaid, the suit alleged. |
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The court
appointed Professional Benefit Administrators, Inc. of Hinsdale, Illinois, as the
independent fiduciary to hold the funds in escrow. They will be paid out
on a prorated basis from this settlement and from funds available from the Kelly
Food Products bankruptcy estate. Payouts to participants, beneficiaries or
health care providers will be based on the amounts due them as determined by the
health plan's third-party administrators during 1996. |
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Schumacher also
agreed to pay $3,000 in fees to the independent fiduciary and $9,276.51 as a
penalty for fiduciary violations under the Employee Retirement Income Security
Act (ERISA). |
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The order also
bars Schumacher permanently from serving as a fiduciary or service provider and
from using any family member or other person to act directly or indirectly as a
fiduciary to any employee benefit plan subject to ERISA. If he elects to
maintain a health plan for any company he controls, the court order stipulates
Schumacher must use a full indemnity health insurance company: must forward
employer and employee contributions on or before the time required by law, and
must notify participants and beneficiaries of any changes in their insurance
coverage within 30 days of such changes. |
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The company,
which manufactured potato chips and other snack foods, ceased operating October 11,
1996 and was put into bankruptcy on October 21, 1996. Kelly sponsored a
self-funded health plan, established in 1987 for the company's employees.
The company retained stop-loss insurance for paying individual claims in excess
of $30,000 per participant per contract year. |
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The consent
judgment resulted from an investigation conducted by the Kansas City Regional
Office of the department's Pension and Welfare Benefits Administration into
alleged violations of the ERISA. It was filed in federal district court in
the Central District of Illinois in Urbana. |
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(Herman v. Donald Schumacher, et al.
Civil Action No. CV-99-2120) |
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U.S. Department of Labor
news releases are accessible on the Internet. The information in this news
release will be made available in alternate format upon request (large
print, Braille, audio tape or disc) from the Central Office for Assistive
Services and Technology. Please specify which news release when placing
your request. Call 202.693.7773 or TTY 202.693.7775. |
