Insurance Carrier Enters
into Agreement to Cooperate with Government Investigation
and Pay $5,550,000 in Fines and Penalties for its
Role Failing to Disclose Hidden Fees
United States Attorney
Karen P. Hewitt announced today that the UNUM Group would pay $5,550,000 in fines and penalties to the
federal government based upon its role in failing to
report
special fees it was paying to a San Diego-based insurance
broker as required by the Employee Retirement
Income Security Act of 1974, commonly known as “ERISA.”
According to Assistant U.S. Attorneys
Phillip L.B. Halpern and Lawrence A. Casper, who were
in
charge of the investigation, ERISA requires the administrators
of qualified insurance plans to provide certain
specified information (including all commissions and
fees paid to insurance brokers in connection with the
purchase of group insurance) to the United States Department
of Labor, Employee Benefits Security
Administration (DOL) and the Internal
Revenue Service (IRS). The prosecutors
noted that Unum – at
the request of the San Diego Insurance broker – agreed
to make payments of certain fees at various times
from 2000 through 2004 without disclosing those fees
to the insurance plan administrator (the “insured”).
These special fees were typically denoted
as RFP, communication or enrollment fees. As a result,
the insured
unknowingly paid higher premiums. In total, the San
Diego broker secretly charged the insured millions
of
dollars in higher premiums based upon the undisclosed
special fees.
The prosecutors added that the United
States Attorney’s Office agreed to a negotiated
settlement of
this matter based, in part, on UNUM's: (1) timely,
voluntary and complete disclosure of the underlying
conduct; (2) thorough, real-time cooperation with the
DOL, IRS, Federal Bureau of Investigation (FBI),
and United States Postal Inspection Service (USPIS)
in uncovering related fraudulent conduct; (3)
substantial and continuing remedial efforts, including
the company’s agreement to maintain a set of
internal
controls, including comprehensive compliance standards
and procedures; and (4) relative lack of culpability
when measured against the conduct of the primary involved
insurance broker (“Insurance Broker A”)
and
other similarly situated insurance carriers underwriting
comparable corporate insurance policies.
United States Attorney Hewitt said, “Insurance
commission and fee disclosure is designed to promote
transparency. Efforts to conceal the payment of those
fees will not be tolerated.”
“The Labor Department will not
tolerate service providers who fail to disclose fees
or compensation
arrangements that impact benefit plans,” said
Bradford P. Campbell, Assistant Secretary of the Labor
Department's Employee Benefits Security Administration. “This
case demonstrates the importance of our
enforcement and regulatory efforts to ensure that benefit
plan fiduciaries have the information they need to
fulfill their responsibilities and to protect the interests
of the workers in their plans.”
“The signed agreement between the
United States Attorney's Office and UNUM Group and
the
forfeiture of over $5 million is a premier example
of how federal law enforcement agencies work in
partnership to protect policy holders,” said
Debra D. King, Special Agent in Charge, IRS-Criminal
Investigation, Los Angeles Field Office. “IRS-Criminal
Investigation will continue to be aggressive in
supporting any joint effort directed at halting criminal
activity that weakens the integrity of our insurance
programs and ensure that tighter compliance controls
be adhered to.”
FBI Special Agent in Charge Keith Slotter
added, “It is necessary that full disclosure
be an accepted
practice. Failure to provide honest goods and services
to the American people will not be tolerated by federal
law enforcement.”
“Corporate compliance with the
law is vital to ensure consumer protection. The Postal
Inspection
Service remains committed to the protection of consumers
and those investigations that harm them,” said
B.
Bernard Ferguson, Inspector in Charge - Los Angeles
Division, U.S. Postal Inspection Service.
The UNUM Group:
The UNUM Group is a publicly traded company headquartered
in Chattanooga, Tennessee, which
provides among other things, group long-term and short-term
disability insurance, group life insurance, and
group accidental death and dismemberment insurance.
INVESTIGATING AGENCIES:
U.S. Department of Labor, Employee Benefits Security
Administration
Federal Bureau of Investigation
Internal Revenue Service - Criminal Investigation Division
Postal Investigations Service
