Union accuses two of embezzlement

February 10, 1994|By Gary Cohn | Gary Cohn,Sun Staff Writer

Two women devised a sophisticated computer scheme involving hundreds of bogus medical claims and embezzled almost $1.5 million from the health fund of the Baltimore-area Ironworkers union, a lawsuit filed yesterday alleges.

The alleged theft was carried out by a pair who worked in the union's benefits office and who over a span of five years wrote 280 checks to themselves, according to the lawsuit.

The alleged embezzlement was discovered after an independent firm, Weaver Associates, took over administration of the health fund in November and found it could not reconcile payments and medical services provided.

The U.S. Attorney's Office, the State's Attorney's Office and the Baltimore County Police Department are investigating the allegations. No criminal charges have been filed.

Ironworkers Local No. 16 Health Fund filed a civil lawsuit in Baltimore County Circuit Court yesterday alleging that Kristin J. Kupfer Lovin of Baltimore County and Sandra Edwards of Harford County diverted almost $1.5 million in union health funds to themselves.

Judge John Grason Turnbull II granted an injunction yesterday prohibiting the women from transferring any of their funds or other assets.

When contacted by The Sun yesterday, Ms. Lovin said she was unaware of the lawsuit. Asked about allegations that she had embezzled funds, she said, "No, it's not true." Ms. Edwards could not be reached for comment.

Local No. 16, based in Dundalk, represents about 850 Ironworkers in the Baltimore region who do everything from building bridges to putting up the steel structures for skyscrapers. The union's health fund provides health benefits to eligible employees and their dependents. It is funded mostly through employer contributions.

The alleged scheme is unusual because of the large amount of money stolen and the length of time it went undetected. But it also appears that the people involved were thoroughly familiar with the health fund's payment system and had an extensive knowledge of its computer systems.

Robert B. Schulman, a lawyer for the Local 16 health fund, said the defendants were longtime employees of the fund with extraordinary knowledge of the computer systems and the medical payment processes.

Mr. Schulman added that it is "too early for us to tell" whether others may have participated in the alleged scheme.

While working for the benefits office, the women processed claims and prepared checks for union members for reimbursement of medical expenses.

But Ms. Lovin and Ms. Edwards, the lawsuit says, were also systematically filing false claims on behalf of union members and manipulating the process so that checks would be made out in the defendants' names.

The union maintained a computer master file which contained the names and vital information of all of its participants in the health plan. But all claim payments were initiated and tracked through a separate computer program.

This allowed the women to file medical claims in the names of actual union members. But once the claim was filled, the women allegedly went back into the computer and put in their own names for payment hundreds of times, the lawsuit contends. To conceal the theft, the lawsuit claims, the defendants removed the canceled checks from the union's monthly bank statements.

"In this way, it appeared that claims were being filed on behalf of several different participants, while in reality all of the checks were made to two people," said Leonard M. Spencer Jr., treasurer and managing principal of Weaver Associates. "It is understandable how this complicated operation could have eluded discovery."

Using this scheme, the lawsuit alleges, Ms. Lovin and Ms. Edwards embezzled $1,450,752 between 1989 and 1993. The checks were deposited in their personal bank accounts, the lawsuit states.

Guido Iozzi, the union's business manager, had recommended last fall the hiring of an outside firm to manage the health fund, which until then had been run by the union's in-house office, which employed Ms. Lovin and Ms. Edwards.

The alleged theft came to light when Weaver Associates was hired in November to manage the program and began converting the in-house office's records into its own accounting system; it discovered a "substantial number of missing checks" for 1993. Duplicates of these checks -- totaling $464,557 -- were obtained, showing that they had been issued to Ms. Lovin and Ms. Edwards, the lawsuit states.

With that information, Weaver Associates expanded its investigation and, the lawsuit says, discovered that almost 300 checks since 1989 had been made out to the women and deposited in their personal accounts.

Documents were turned over to Assistant State's Attorney Frank C. Meyer Jr. on Dec. 17 during a meeting attended by the health fund's lawyer, a trustee of the fund's board, a member of the Baltimore County Police and a representative from Weaver Associates.

It was agreed at that time that no one else would be immediately informed of the case so that authorities would have time to investigate further. The Executive Committee of Local 16's health fund was given the details of the case Monday.

After filing the lawsuit yesterday, Mr. Schulman said he hopes the money can be recovered but that he is still bothered that the alleged theft could have gone on undetected for so long.

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