Grand Jury Convened – FBI Raids MEWA
A here-to-fore undisclosed grand jury has been convened to investigate criminal charges against American Labor Alliance (ALA) and its officers. In addition, an FBI raid has been carried out on ALA headquarters, and evidence was seized. It is unknown precisely when indictments might be handed down, or arrests will be made.
All of this comes against a background of a continuing investigation and case against the organization by the California Department of Insurance for marketing an allegedly illegal and invalid ‘alternative’ to workers’ comp insurance or self-insurance. ALA sells a program called CompOneUSA.
The Department of Industrial Relations also has an open investigation. DIR officials caution employers to make sure their workers’ comp requirements are met legally. Beyond that, they indicated they could make no comment.
Federal Bureau of Investigation officials confirmed to Workers’ Comp Executive that it sent agents to the address housing ALA’s offices. As is typical in such circumstances, FBI officials would not go into specifics on what they were looking for or what they took away.
“I think that’s how the U.S. Attorney typically operates,” says ALA’s attorney, Charles Manock. “It’s like any other legal process, they ask for documents, and they’ll ask for more documents.”
Manock equates the grand jury’s inquiry into the organization with the typical discovery process. “They’re using [the Grand Jury] to ask for documents as part of the investigation,” he says, alleging that the investigation by the U.S. Attorney’s office is politically motivated.
Manock dismissed the possibility that the case will lead to criminal indictments against those involved. “I expect to be able to talk to the FBI and see if I can make some of this go away,” he told Workers’ Comp Executive.
The CompOneUSA program has the participation of hundreds of employers and some 30,000 employees according to representations made by ALA. It continues to be marketed by multiple organizations.
An earlier investigation by Workers’ Comp Executive turned up pertinent facts: ALA has been collecting workers’ comp assessments that employers pay as part of their workers’ comp premiums to fund the Department of Industrial Relations’ operations and the California Insurance Guarantee Association. Both organizations confirmed ALA has no legal authority to collect the assessments.
Later, at trial, ALA’s chairman Marcus Asay testified under oath that none of the assessment have been forwarded to the agencies.
CIGA officials confirm that it provides no coverage to the coverage sold by ALA in the event of a failure, so employers will be on their own to pay outstanding claims.
Assay told Workers’ Comp Executive that it minimizes claims by telling lawyers that it is a union carve out so they – the lawyers – can’t be involved. ALA is no such thing. Assay also admitted to Workers’ Comp Executive that claims are paid out of current cash flow and that no reserves are posted. There is no guarantee association coverage so in the event of a failure – employers will be on their own.
The federal action follows efforts by the CDI to shut the program down. CDI issued a cease and desist order last fall, but ALA and its associates continue to market the program. The organization is challenging the Department’s actions through CDI’s administrative hearing process, and that case is on-going.
ALA maintains that it is outside state regulation because it is an entity claiming exception (ECE) under the federal Employee Retirement Income Security Act. It maintains that as a union it offers ERISA benefits to employers and their employees, not workers’ comp insurance.
The Department says whatever ALA is selling is not valid coverage. “The end result is employers [are] holding worthless pieces of paper, as the policies are not valid, which means the employers have no coverage – leaving them and their employees at great risk,” the Department noted at the time.
State officials maintain that the “benefits” ALA provides are not the required statutory insurance coverage, and legal experts say these employers do not have the protection of California’s sole and exclusive remedy law. Injured workers, therefore, could bring cases for damages against employers. Such claims are excluded from all Commercial General Liability policies, say experienced brokers.
DOL: ALA HAS NO AUTHORIZATION
A key element of ALA’s marketing and justification is that it is a union offering workplace injury benefits, but DOL officials earlier this year sent ALA a letter indicating the organization has no union designation. DOL also terminated its file.
Amazingly, ALA officials are disputing the authenticity of the DOL letter in the CDI hearing, but DOL officials confirmed to Workers’ Comp Executive that the letter is authentic.
ALA’s Manock also downplays the significance of the action if, he says, in fact, it did occur.
“Even if the Department of Labor said, and that still remains open, even if the Department of Labor said you’re not a union that doesn’t mean you’re not a union,” he maintains. “[DOL’s] not the only arbiter of who or what a union is.”
DOL officials declined to comment, given the state of the investigation, on the latest activity.
For additional coverage of this continuing situation, what else has transpired so far and our continuing investigation, click here.