Federal Court Orders Millions of Dollars Restored to Connecticut Health and Retirement Plans

The U.S. District Court for the District of Connecticut has ordered the Bridgeport Health Care Center (BHCC), which had operated two former Bridgeport, Connecticut, 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 Department of Labor (DOL)’s Employee Benefits Security Administration (EBSA) and litigation by the DOL’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.

The EBSA learned that BHCC and Stern failed to collect employer contributions due to the health plan, told plan participants they had health care coverage when they did not and mismanaged BHCC’s finances. The latter resulted in unpaid health claims for employees. Stern also diverted more than $4.4 million of retirement plan assets to himself, BHCC and a New York charity—Em Kol Chai—as well as other entities.

The DOL filed suit against the defendants for the retirement plan violations in 2016 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, which represented some of the participants in the health and retirement plans, filed suit.

In April 2018, BHCC filed for Chapter 11 bankruptcy. The bankruptcy court appointed a Chapter 11 trustee who terminated Stern, removing him as a fiduciary to both plans. The District Court held a joint mediation for the three lawsuits, and the resulting consent judgment and order settles all three lawsuits.

Under the terms of the consent judgment and order, the defendants will pay $2,526,392 to the health plan to appoint a claims administrator and resolve numerous unpaid health claims. In addition to the $4,141,950 that Stern has already paid to the retirement plan, the defendants will pay an additional $840,565 to the retirement plan. The DOL 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.

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