CHICAGO – A federal judge has issued a preliminary injunction against the fiduciaries of a Chicago-based multiple employer welfare arrangement to protect the fund’s remaining assets after a Department of Labor investigation alleged its fiduciaries and counsel misused more than $2.8 million in fund assets, and that they continue to mismanage the fund.

On Aug. 10, 2023, Judge Nancy L. Maldonado in the Northern District of Illinois, Eastern Division, issued an order protecting the remaining assets of the United Employee Benefit Fund and appointed an independent fiduciary to take control of the fund and manage its remaining assets. The United Employee Benefit Fund provides life insurance benefits to about 63 employer-sponsored benefit plans in the U.S.

The court’s action comes in response to a motion filed by the department in June 2023 that alleges the fund’s fiduciaries have allowed escalating and unreasonable legal and administrative fees to nearly deplete the fund’s assets. These actions included the payment of more than $200,000 in legal fees used to defend former fund attorney L. Steven Platt in a lawsuit brought by the United Employee Benefit Fund for Platt’s alleged breaches of fiduciary duties and other Employee Retirement Income Security Act violations.

“The injunction is the latest step in the Department of Labor’s ongoing effort to hold the United Employee Benefit Fund’s fiduciaries and others liable for allegedly misusing more than $2.8 million in fund assets,” said Regional Solicitor Christine Heri in Chicago. “The department is determined to protect the assets of employee benefit plans and to hold fiduciaries responsible for failing to discharge their legal duties to protect these assets.”

In February 2022, the department filed a complaint alleging multiple violations of ERISA from 2015 to 2018 by UEBF’s fiduciaries and its former counsel. The complaint seeks to recover losses and interest and to bar the fiduciaries and former counsel permanently from serving as fiduciaries and service providers to employee benefit plans. The action followed an EBSA investigation in Chicago of alleged violations by trustees Gary Meyers and John Fernandez, administrator David Fensler, trustee and service provider Herbert McDowell and his company United Preferred Companies Ltd. and former fund attorney Platt, who was previously employed by Robbins, Salomon & Patt Ltd., a Chicago law firm.

The court order removes the current trustees and enjoins them, or anyone acting on their behalf, from acting as a fiduciary or service provider to the Fund. The order also gives Receiver Management, Inc., as independent fiduciary, the authority to exercise all fiduciary responsibilities over UEBF, including to do the following:

Appoint, replace, or remove administrators, trustees, attorneys, employees, and service providers as are necessary to protect the fund.
Amend the trust agreement as necessary.
Conduct an accounting of the fund’s assets and attorney’s fees.
“The United Employee Benefit Fund fiduciaries’ alleged violations of the Employee Retirement Income Security Act significantly depleted the fund’s assets and may have impacted its ability to pay benefits to the United Employee Benefit Fund’s participants nationwide,” said Employee Benefits Security Administration Regional Director Ruben R. Chapa in Chicago. “The actions may have irreparably harmed beneficiaries by causing the fund to be unable to meet its obligations”

The department’s investigation alleges the defendants violated ERISA when they did the following:

Transferred more than $1.1 million in fund assets to a third party to purchase McDowell’s home while in foreclosure in November 2016, and allowed McDowell to continue living there through transactions orchestrated by Platt and David Schwalb, an attorney who knowingly participated in the transaction.
Transferred $400,000 in fund assets to McDowell’s foreclosure attorney in August 2016 and January 2017.
Transferred $84,000 in fund assets to McDowell directly in August 2017.
Paid an unreasonable $77,000 in fund assets to McDowell/UPC from April 2017 through April 2018 to purportedly research health benefits for the purpose of starting a new plan or adding health insurance to the fund.
Paid $44,440 in fund assets in May 2015 to McDowell’s son as part of a dispute with a third party over life insurance commissions.
Loaned McDowell $5,000 in fund assets in August 2015.
Paid McDowell unreasonable compensation of $895,000 between November 2015 and September 2018.
Loaned $260,000 to an entity partially owned by trustee Meyers in December 2017.
Civil Case No. 1:22-cv-01030

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