Goodwill Sues Health Plan Fiduciaries Over Alleged Fraud Scheme

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By Carmen Castro-Pagan

Goodwill Industries accused three fiduciaries of its health savings account program of siphoning off hundreds of thousands of dollars of plan assets to subsidize one of the fiduciaries’ luxurious lifestyle ( Morgan Mem’l Goodwill Induss., Inc. v. Axis Benefit Adm’rs, Inc. , D. Or., No. 3:17-cv-01168, complaint filed 7/26/17 ).

Darren Bottinelli, as owner of Axis Benefit Administrators Inc. accessed plan assets it managed as third-party administrator, including those of Goodwill’s plan, to maintain his luxurious lifestyle, according to a lawsuit filed July 26 in federal court in Oregon. Bottinelli, who had to pay back more than $3 million that he has admitted he stole from the plans, used the money to pay for memberships to exclusive and private clubs, frequent high-end restaurants, buy expensive wines, and travel first class, the nonprofit thrift store organization alleges.

The plan’s trustee, KHA Accountant & Advisors P.C., allegedly acted in concert with Axis and Bottinelli as a “sham trustee” of the plan, charging the plan thousands of dollars in “fraudulent trustee fees” while performing “exactly zero legitimate trustee functions,” the lawsuit says.

Bottinelli’s fraud was discovered in 2014 after Axis ceased operations, the lawsuit alleges. In 2015, the Labor Department sued Axis and KHA over Bottinelli’s acts. KHA agreed to pay $168,827 to settle that complaint.

In 2016, Bottinelli pleaded guilty to theft in connection with health care and is serving a 46-month sentence in federal prison.

Through Axis, Bottinelli administered employee health reimbursement and flexible spending accounts for clients nationwide, according to a 2016 statement by the Department of Justice. After Axis “abruptly” closed its offices in 2014, more than 3,000 plan participants were unable to access their account funds, the statement said. In addition to Goodwill, Bottinelli’s clients included government contractors and other companies who hire hourly and minimum wage contract workers, the statement said.

In its lawsuit, Morgan Memorial Goodwill Industries Inc. alleges that the plan hasn’t been made whole by the damage caused by Bottinelli, Axis, and KHA. Goodwill seeks restitution under the Employee Retirement Income Security Act of all plan contribution payments it made to Axis since April 2008.

KHA didn’t immediately respond to Bloomberg BNA’s request for comment.

Littler Mendelson PC represents Goodwill.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at ccastro-pagan@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

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