Do your homework: accountability for plan providers

We don’t want to think this will happen. But here’s a recent case in Texas that demonstrates the need to have strict accountability on providers of plan services. Two paragraphs from the Department of Justice news release:

Dallas Businessman Sentenced to 120 Months in Federal Prison for His Role in Conspiracies to Steal Pension Plans and Commit Health Care Fraud

“DALLAS – Oct. 31, 2012  Robert Hague-Rogers, 76, of Frisco, Texas, was sentenced yesterday afternoon by U.S. District Judge Sam A. Lindsay to 120 months in federal prison and ordered to forfeit $9,345,775, following his guilty plea in April 2012 to one count of conspiracy to commit theft or embezzlement from an employee benefit plan and one count of conspiracy to commit healthcare fraud. Hague-Rogers has been in custody since his pre-trial release was revoked by the Court on September 4, 2012. Today’s announcement was made by U.S. Attorney Sarah R. Saldaña of the Northern District of Texas.

According to the factual resume filed in the case, Hague-Rogers admitted that he executed both conspiracies by creating numerous single employer trusts to provide individuals with whole life insurance, death benefits and other post-retirement medical benefits. Hague-Rogers and others, without the knowledge and/or consent of the trusts, caused fraudulent and unauthorized loans to be made against the whole-life policies. He and his immediate family used the funds for personal expenses including leases of luxury vehicles, house payments and taxes, and private life insurance policies.”

This sad tale for the affected plan sponsors illustrates the need to have procedures in place for monitoring vendors. Ongoing accountability is needed in addition to checking the references and background of providers prior to engagement. Here is a checklist of items to track:

–          Plan fees

–          Performance according to the agreement

–          Internal controls at the service provider regarding employees, trades, cash management

–          Financial risk parameters

–          Vendor management changes

–          Collateral verification

Well documented accountability measures will prevent your company from being on the losing end of unscrupulous transactions.