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 its former officer, Chaim Stern, to pay nearly $3.4 million to BHCC”™s employee health and retirement plans.
In addition to the $3,366,957 due those plans to resolve violations of the Employee Retirement Income Security Act (ERISA), Stern had previously paid another $4,141,950 to the retirement plan.
Bridgeport Manor closed in 2018, having lost some $21 million over the previous four years due in part to Stern”™s financial misdeeds, while Bridgeport Health Care Center was ordered closed this past January after efforts at finding a new owner failed.
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.
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; New York charity Em Kol Chai; and other entities.
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.
