New York Trusts, Revisited: Comp Board Channels Willie Sutton

June 17th, 2008 by

Yesterday we blogged the New York Workers Comp Board’s unusual solution to a cash flow problem: when a dozen trust funds collapsed, the Board decided to hit up the remaining, solvent funds with an assessment: they raised assessments from the routine total of $500,000 to a staggering $12 million. The Board is using the logic of notorious bank robber Willie Sutton, who famously said that he robbed banks because “that’s where the money is.” In this case, the Board is hammering the people who paid their full premiums and whose administrators abided by the rules, simply because they have the money. The board has transformed the “several liability” of independent trusts into a gerry-built “joint liability.” While their motives are good – benefits to injured workers must be paid – their method is patently unfair.
In their press release, the Board pats itself on the back for forcing the third party administrator, CRM, out of business in New York. Here are the terms of the settlement:
– CRM surrenders its TPA license no later than September 8, 2008, and ceases representing self-insured employers and carriers before the Board;
– CRM transfers to the Board all claims, as well as the responsibility for the administration of all such claims, for all of the group self-insured trusts that it still administers; and
– CRM assists in the well-ordered and timely transfer to the Board of all claim files, documents, information, and funds associated with the trusts.
“The Board sought to revoke CRM’s license and today’s agreement accomplishes just that,” said New York State Workers’ Compensation Board Chair Zachary Weiss. “This result speaks volumes about both the strength and validity of the charges the Board brought against CRM. It also sends the strong message that we will vigorously safeguard the well-being of honest business and injured workers.”
The results may speak volumes, but not necessarily in the manner Weiss intends: yes, the charges obviously had merit; yes, it’s important to shut down CRM’s operation. But what about accountability? According to an unidentified spokesman, CRM has admitted no violations and paid no fines or penalties. Despite the apparent deliberate misrepresentation of actual losses, despite paying their own executives inflated salaries, despite creating this entire mess, CRM just walks away. For the moment at least, they are off the hook, while the solvent trusts who played by the rules are required to dig deep into their own pockets.
Eventually, when the forensic audits have been completed, members of the failed trusts will probably receive retroactive bills for underpaid premiums. Then it will be their turn to howl. When and if that happens, the Board has promised to refund the humongous assessments placed (unfairly) on the solvent trusts. That is not very reassuring to innocent bystanders facing immediate bills for someone else’s problem. My guess is that the Board will run up against the same problem as Willie Sutton: the money might be there (in the trusts), but that does not make it right to take it. Through attorney Richard Honen, the solvent trusts have filed suit to end this ill-conceived bailout. In the interests of fair play, here’s hoping they find a sympathetic judge.