Federal Court Orders Millions Restored to Connecticut Health and Retirement Plans After U.S. Department of Labor Investigation, Litigation

BRIDGEPORT, CT – The U.S. District Court for the District of Connecticut has approved a consent judgment and order requiring Bridgeport Health Care Center Inc. (BHCC) – the operating entity of two former Bridgeport nursing homes – and former officer Chaim Stern, to pay a total of $3,366,957 to BHCC’s health and retirement plans to resolve violations of the Employee Retirement Income Security Act (ERISA).

The order follows investigations by the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) and litigation by the Department’s Office of the Solicitor. During litigation, Stern also paid an additional $4,141,950 to the retirement plan. 

The Bridgeport Health Care Center Inc. Benefit Plan and the Bridgeport Health Care Center Inc. Retirement Plan provide health and retirement benefits for employees of the former Bridgeport Health Care Center and Bridgeport Manor nursing homes. BHCC was a fiduciary and the administrator of both plans. Stern was also a fiduciary and acted as the administrator for both plans.

EBSA’s investigations revealed that BHCC and Stern failed to collect employer contributions due to the health plan, misrepresented to plan participants that they had health care coverage and mismanaged BHCC’s finances resulting in unpaid health claims for employees. Stern also diverted over $4.4 million of retirement plan assets to himself, BHCC, a New York charity – Em Kol Chai – and other entities.

In 2016, the Department filed suit against the defendants for the retirement plan violations and, in 2018, for the health plan violations. In 2015, Local 1522 of Council 4 of the American Federation of State, County and Municipal Employees, representing some of the participants of the health plan and the retirement plan, filed suit in relation to the unpaid health claims, and added claims relating to the retirement plan in 2017, under ERISA and the Labor Management Relations Act.

BHCC filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Connecticut in April 2018. The bankruptcy court appointed a Chapter 11 trustee who terminated Stern, removing him as a fiduciary of both plans. The U.S. District Court held a joint mediation for the three lawsuits and the resulting consent judgment and order settles all three lawsuits. The U.S. Bankruptcy Court approved the consent judgment and order on June 19, 2020. BHCC also reserved $970,796 as ongoing employer contributions to the retirement plan during the bankruptcy. 

Under the terms of the consent judgment and order:

• The defendants will pay a total of $2,526,392 to the health plan to appoint a claims administrator and resolve numerous unpaid health claims;
• The defendants will pay $840,565 to the retirement plan, in addition to $4,141,950 Stern has already paid to the plan;
• The Department will assess $490,057 in civil money penalties to Stern; and
• Stern agrees not to serve as a fiduciary of an ERISA-covered plan in the future under penalty of contempt, if he violates this provision of the order.

In a separate criminal case, Stern pleaded guilty in U.S. District Court to embezzlement and tax charges in January 2020. He is awaiting sentencing.

“The defendants have a fiduciary duty under the Employee Retirement Income Security Act to administer the plans and their assets solely in the interests of the participants and their beneficiaries. That includes proper and adequate funding of the plans and providing important, accurate and timely information to participants,” said Employee Benefits Security Administration Regional Director Carol Hamilton.  

“The plans’ participants suffered financial harm due to the defendants’ action, from incurring the costs of unpaid or unprocessed health claims and being deprived of funding for their retirement benefits. The conclusion of the litigation provides those participants with relief and demonstrates the U.S. Department of Labor’s commitment to ensuring that employers take seriously their responsibility to provide benefits to their employees and their beneficiaries,” said Regional Solicitor of Labor Maia Fisher, in Boston, Massachusetts.

EBSA’s Boston Regional Office investigated and the Boston Regional Solicitor’s Office litigated the cases. Employers and workers can reach EBSA toll-free at 866-444-3272 for help with problems related to private sector retirement and health plans. Additional information is available at https://www.dol.gov/agencies/ebsa.

EBSA’s mission is to assure the security of the retirement, health and other workplace related benefits of America’s workers and their families. EBSA accomplishes this mission by developing effective regulations; assisting and educating workers, plan sponsors, fiduciaries and service providers; and vigorously enforcing the law. 

The mission of the Department of Labor is to foster, promote and develop the welfare of the wage earners, job seekers and retirees of the United States; improve working conditions; advance opportunities for profitable employment; and assure work-related benefits and rights.

Scalia v. Bridgeport Health Care Center Inc. and Chaim Stern.

Civil Action Numbers:  3:18-cv-00189-KAD, 3:16-cv-01519-KAD.