Press Releases

Manhattan U.S. Attorney Settles Civil Fraud Lawsuit Against Union Welfare Fund For Illegally Inflating Insurance Premiums Paid For With Head Start Funds

Thursday July 26, 2012

Fund Admits Overbilling by More Than $3 Million and Agrees to Pay Approximately $5 Million in Damages

Preet Bharara, the United States Attorney for the Southern District of New York, announced today that the United States has filed and simultaneously settled a civil fraud lawsuit alleging that DISTRICT COUNCIL 1707, LOCAL 95 HEAD START EMPLOYEES WELFARE FUND (the “Fund”) violated the False Claims Act and common law when it charged a Head Start grantee higher rates for hospital insurance premiums than it had originally paid for the premiums.  As part of the settlement, the Fund admitted, acknowledged, and accepted responsibility for charging more for the insurance premiums than it paid, and agreed to pay the Government approximately $5 million.  The settlement was approved today by U.S. District Judge William H. Pauley III.

According to the Complaint filed in Manhattan federal court:

The Fund administers hospitalization insurance for employees who work for agencies that carry out Head Start programs (“Delegate Agencies”).  Head Start programs promote school readiness by providing educational, health, nutritional, social and other services to enrolled children and their families.  The Delegate Agencies are funded by the New York City Administration for Children’s Services (“ACS”), which is a Head Start grantee.  Each year, on behalf of the Delegate Agency employees, the Fund negotiates a contract with an insurance provider for hospitalization insurance, and it sends monthly invoices to ACS for reimbursement. ACS then pays the Fund for the insurance premiums using Head Start grant money.  Prior to 2008, the Fund violated the False Claims Act as well as common law when it submitted invoices to ACS for amounts higher than what the Fund actually paid the insurance provider.  As a result, over the relevant time period, ACS paid the Fund approximately $3 million more than what the Fund actually paid for the hospitalization insurance premiums. 

In addition to acknowledging the overbilling in its settlement with the Government, the Fund will pay the Government approximately $5 million.

Mr. Bharara thanked the Department of Health and Human Services, Office of Inspector General, the Department of Labor, Office of Inspector General, and the New York Regional Office of the Department of Labor’s Employee Benefits Security Administration for their assistance.

The case is being handled by the Office’s Civil Frauds Unit.  Assistant U.S. Attorney Ellen London is handling the case.






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