An investigative and legal pursuit that spanned almost two decades ended last week when the Department of Labor obtained a final order in a Pennsylvania federal court to conclude its case against a disbarred attorney and former benefits plan fiduciary who diverted millions from employee benefit plans.
In 2003, the department’s Employee Benefits Security Administration Philadelphia Regional Office began an investigation of John J. Koresko V, of Bridgeport, 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, boat rentals and other improper personal uses.
On Aug. 19, the U.S. District Court for the Eastern District of Pennsylvania issued a final order closing the case and 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 more than 200 employee benefit plans nationwide harmed by Koresko and others – bringing the total distribution to the affected plans to $68 million.
From the start of EBSA’s investigation, Koresko refused to cooperate, and the department sought court orders to enforce subpoenas issued by EBSA. The court later found Koresko in contempt.
Case specifics
In 2015, 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.
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 counsel, lobbyists, operating expenses of his companies, and for personal expenses – all in violation of the Employee Retirement Income Security Act.
With one exception, the court found the defendants – including Koresko – liable for almost $20 million in restitution for losses and disgorgement of profits. The court also removed and barred the defendants from serving as fiduciaries to any ERISA-covered 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,” EBSA Philadelphia Regional Director Michael Schloss said in a statement. “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.”
With more than 20 years serving financial markets, John Sullivan is the former editor-in-chief of Investment Advisor magazine and retirement editor of ThinkAdvisor.com. Sullivan is also the former editor of Boomer Market Advisor and Bank Advisor magazines, and has a background in the insurance and investment industries in addition to his journalism roots.
