Insurers Have Been Draining Funds from New Jersey’s Pensions for 15 Years

Insurance firms have been siphoning off money from New Jersey’s pension funds for the past 15 years thanks to a policy decision that shifted financial obligations for employee injuries to pension funds, according to an investigation by acting state Comptroller Kevin Walsh.

A report on the investigation said that a 2006 policy adopted by the Division of Workers’ Compensation (DWC) encourages injured employees to accept continuing medical monitoring and coverage instead of cash settlements. The report said the approach, which puts the financial burden on pension funds to pay workers rather than on insurance firms, has provided “a windfall to insurers and financially harms the pension funds.”

At least 114 public employees received both an accidental disability pension and a medical monitoring settlement between 2016 and 2019, according to the report. However, it said the exact cost to the pension funds was unknown because there are no records or data on what insurers would have paid in the absence of medical monitoring settlements.

“State agencies should all be rowing in the same direction and not implementing or tolerating policies that expose the pension funds to costs that insurers already agreed to pay,” Walsh said in a statement. “The medical coverage policy has been a drain on New Jersey’s pension funds for 15 years. It is a loophole that has cost taxpayers an incalculable sum of money and undermined the laws adopted by the legislature.”

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The report said the policy diverges from how state laws say workers’ compensation benefits should be administered. For example, there’s a two-year legal limit on medical coverage for work-related injuries, but the 2006 policy waives that requirement. And, by law, attorneys’ fees must be based on how much the injured employee is paid by insurers, but the policy provides attorneys’ fees even when insurance providers pay nothing. Additionally, while benefits received must be reviewed periodically under the law, the policy provides lifetime medical coverage for work-related injuries with no additional reviews.

The financial harm to pensions can be avoided in the future, said the report, if DWC and the state’s Division of Pensions and Benefits implement changes that ensure the pension funds benefit from the offsets required by law when a worker petitions for both an accidental disability pension and workers’ compensation.

The state comptroller’s office said it launched an investigation into the matter after receiving a complaint that public employees were being encouraged to seek medical monitoring settlements in order to avoid pension offsets.

“The two agencies should take whatever steps are necessary, in accordance with applicable law, to prevent medical monitoring settlements from causing further financial harm to the state of New Jersey and its pension funds,” according to the report.

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Tags: Comptroller, Division of Workers’ Compensation, injury, insurance, Kevin Walsh, New Jersey, Pension

The US Securities and Exchange Commission (SEC) has charged three people with defrauding hundreds of retail investors out of more than $11 million through two fraudulent and unregistered digital asset securities offerings.

According to the SEC’s complaint, Kristijan Krstic, the founder of online companies Start Options and Bitcoiin2Gen, and John DeMarr, who was the primary US-based promoter for the companies, fraudulently induced investors to buy digital asset securities over the course of a year and a half ending in May 2018.

The SEC alleges Krstic and DeMarr touted Start Options’ purported digital asset mining and trading platform, falsely claiming it was “the largest Bitcoin exchange in euro volume and liquidity” and had been “consistently rated the best and most secure Bitcoin exchange by independent news media.”

The SEC also accused Krstic and DeMarr of promoting Bitcoiin2Gen’s unregistered initial coin offering (ICO) of digital asset securities known as B2G tokens. The complaint also accused Robin Enos, who was working with DeMarr, of drafting fraudulent promotional materials that he knew would go out to the investing public. The materials allegedly contained many false statements, including the claims that the B2G tokens would be deliverable on the Ethereum blockchain, that the invested funds would be used to develop a coin that was “mineable,” and that the tokens would be tradeable on a proprietary digital asset trading platform.

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“In reality, Bitcoiin2Gen was a sham,” according to the complaint. “Enos knowingly or recklessly drafted, and DeMarr and Krstic knowingly disseminated, fictitious technical white papers and fake websites to create the misleading appearance that the B2G tokens were genuine digital assets that were trading on the Ethereum blockchain, when they knew or recklessly disregarded that they were not.”

Previously, actor Steven Seagal agreed to pay more than $300,000 to settle charges brought against him by the SEC that alleged he failed to disclose payments he received for promoting an ICO conducted by Bitcoiin2Gen.

To avoid facing the wrath of angry investors, DeMarr allegedly attempted to stage his own disappearance. He allegedly had Enos and unnamed co-conspirators disseminate notices to investors that claimed DeMarr had been assaulted during a visit to Montenegro and had subsequently gone missing. The notices also told B2G investors to stop attempting to contact DeMarr or his family regarding their inability to have their investment in B2G returned.

But instead of having been assaulted and disappearing in Montenegro, according to authorities, DeMarr had mainly been in California using investor funds to buy jewelry and luxury vehicles such as a Porsche and to remodel his home.

The SEC’s complaint charges Krstic and DeMarr with violating the antifraud and registration provisions of the federal securities laws, and Enos with aiding and abetting the antifraud violations. The complaint seeks injunctive relief, disgorgement plus interest, penalties, and an officer-and-director bar against Krstic and DeMarr.

In a parallel action, the US Attorney’s Office for the Eastern District of New York and the Department of Justice (DOJ) have also filed charges against DeMarr.

“The conduct alleged in this action was a blatant attempt to victimize those interested in digital asset technology and these defendants should be held accountable,” Kristina Littman, chief of the SEC Enforcement Division’s Cyber Unit, said in a statement. “In reality, we allege, these ventures were fraudulent enterprises aimed simply at misappropriating funds from investors.”