(September 19, 2012) – The United States Department of Labor has filed a lawsuit against Dietrich & Associates, a Pennsylvania-based insurance brokerage, for alleged “for violations of ERISA [Employee Retirement Income Securities Act] in connection with the purchase of a group annuity for a pension plan…sponsored and administrated by Memorial Hospital.”
The complaint, officially filed by Secretary of Labor Hilda Solis, claims Dietrich rigged the bidding process for Memorial Hospital’s annuity purchase, presenting false final bids to ensure Hartford Life Insurance Company’s bid came in lowest and won. Hartford, in turn, had allegedly struck a kickback deal with Dietrich: the insurance company would pay a portion of the annuity’s purchase price to the brokerage, provided Hartford won.
A total of six final submissions came in from insurance companies, and Hartford’s $26.1 million bid was the second highest. The complaint asserts that Dietrich increased the other bids by 2%, rendering Hartford the lowest bidder—even though its offer included an extra 2% kickback for Dietrich.
In December 2003, Memorial Hospital selected Hartford to provide the annuity for its pension plan, which was in the process of closing. Roughly two months later, Dietrich allegedly received $522,047 from Hartford for “expense reimbursements” related to the annuity purchase.
Kurt E. Dietrich, the sole owner of his eponymous brokerage, has testified to elements of this account of events, according to court documents. His firm, under contract to arrange the bidding process, was prohibited from accepting compensation from insurance companies.
The Department of Labor is suing Dietrich & Associates for violating ERISA. The prosecution is seeking $522,047 plus interest, a ban on Dietrich & Associates from acting as fiduciaries, and any other “such relief as may be just and equitable.”
Attorneys for both parties failed to respond to requests for comment.