In a legal pursuit that spanned more than 18 years, the Department of Labor has obtained a final court order concluding its case against a disbarred attorney and former plan fiduciary who gained personally by diverting millions from employee benefit plans.
A Sept. 2 announcement by the DOL notes that the U.S. District Court for the Eastern District of Pennsylvania on Aug. 19 issued a final order closing the case against John J. Koresko, who defrauded more than 200 employee benefit plans.
The court also added nearly $4 million to costs previously assessed against Koresko, resulting in a judgment of more than $42 million against Koresko and his companies. The court’s order follows the final distribution in 2021 of $17.7 million to the more than 200 employee benefit plans nationwide harmed by Koresko and others—bringing the total distribution to the affected plans to $68 million.
The case stems from an investigation that began in 2003 by the DOL’s Employee Benefits Security Administration Philadelphia Regional Office of Koresko, the Regional Employers Assurance Leagues Voluntary Employees’ Beneficiary Association Trust and other affiliated companies. The agency found that Koresko and others had diverted tens of millions in plan assets for their personal benefit through a variety of illegal transactions—money that they pocketed and used for purposes such as purchasing personal property on the Caribbean island of Nevis and in South Carolina, as well as boat rentals and other improper personal uses.
From the start of EBSA’s investigation, Koresko refused to cooperate, the DOL notes. As a result, it sought court orders to enforce subpoenas issued by EBSA; the court later found Koresko in contempt.
In 2015, six years after the department filed a complaint and pursued litigation against Koresko, the court found the defendants diverted $38.3 million in plan assets and used more than 18 entities and 21 accounts at more than eight banks to mask its scheme. “The defendants completely disregarded the duty of loyalty they owed to the employee benefit plans and the workers who rely on them,” Assistant Secretary of Labor for Employee Benefits Security Phyllis Borzi stated at the time. “In an ideal world, this does not happen. When it does, there is justice in undoing this massive fraud, and in banning the defendants from coming anywhere near employee benefits again.”
The plans were established primarily to provide death benefits to participants nationwide and were established in connection with Koresko’s Regional Employers’ Assurance Leagues VEBA and single-employer welfare benefit plan. But for more than a decade, Koresko used assets from the plans’ trusts for real estate purchases in South Carolina and on Nevis to pay outside attorneys, lobbying expenses, operational expenses of Penn-Mont Benefit Services, his law firms and for his personal expenses, the DOL notes.
With one exception, the court found the defendants—which included Penn-Mont Benefit Services owned by Koresko; his former law firms; Jeanne Bonney, an attorney formerly associated with the law firms; Penn Public Trust, which was controlled by Koresko; and Koresko himself—liable for nearly $20 million in restitution for losses and disgorgement of profits.
That amount represented the remaining balance of the total diverted assets. Under a July 2013 court order, nearly $20 million of the amount that was due to the plans was frozen in accounts under the control of an independent fiduciary. The court also removed and barred the defendants from serving as fiduciaries to any ERISA plan permanently.
In later proceedings, the court imprisoned Koresko for more than two years after finding him in civil contempt for not complying with the order to disgorge his profits back to the plans.
“The plans’ participants suffered much harm due to the defendants’ action. The conclusion of the litigation provides those participants with relief and demonstrates the U.S. Department of Labor’s commitment to ensuring that employers take seriously their responsibility to provide benefits to their employees and their beneficiaries,” Michael Schloss, EBSA Philadelphia Regional Director, said in a statement.
