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State sues builders group’s ex-leader

LaRocque accused of double-dealing as insurance trustee

Saturday, January 25, 2014
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— The former head of a construction trades group allegedly put the interests of that association ahead of his responsibilities to an insurance trust meant to help builders secure workers’ compensation coverage.

As a result, the trust failed and the state is looking to recover nearly $12 million in damages, according to a lawsuit filed in state Supreme Court in Albany County.

The suit, brought by the New York State Workers’ Compensation Board, accuses Philip LaRocque of self-dealing by serving as executive vice president of the New York State Builders Association at the same time he was a trustee of The Builders’ Self-Insurance Trust.

The trust was created in 1998 to help make workers’ compensation insurance more affordable for employers in the construction industry and grew over time to include some 300 members. The trust was declared insolvent and taken over by the state in 2009.

“Trustee LaRocque fraudulently represented to Builders’ [trust] that he was a trustee working in their best interest, when in reality he was intentionally benefitting NYSBA [the state Builders Association], a separate entity of which he was an officer,” the Workers’ Compensation Board claims in its complaint.

The suit, filed last week, contends bylaws were changed within two years of the trust’s founding to require that being a member of the state Builders Association was needed to be considered for trust membership.

The complaint also contends LaRocque arranged for the association to receive referral commissions from the trust “for every association member who joined the trust.”

“Defendant LaRocque obtained benefits from, and protected the interests of, NYSBA instead of administering his duties as Builders’ trustee in a non-biased manner,” the suit alleges.

Familiar fate

LaRocque, who headed the Builders Association for more than a decade, declined to comment on the suit Thursday, other than to say “I’ve done nothing wrong.” He now is principal of LaRocque Business Management Services in Guilderland, which offers building- and labor-consulting services.

Group self-insurance trusts became popular in the 1990s, a time when workers’ compensation premiums were rising. Employers found that by joining forces with similar businesses, they could monitor each other’s safety practices to reduce injuries and compensation claims and keep insurance rates low.

Trusts were created for grocers, for instance, as well as manufacturers, trucking firms, home health-care providers and others.

A report prepared by a state task force in 2010 said the trusts reached a peak in 2005, with 65 active groups and some 17,000 employers. But the numbers started to slip after that, and New York began to see a rise in underfunded trusts.

The Workers’ Compensation Board, to which the trusts applied for operating authorization and reported their finances annually, became concerned about some of the groups’ funding levels. Insolvencies started to occur in 2006, according to the report, after attempts at remediation by the board failed.

The Builders’ Self-Insurance Trust began to show signs of stress in 2001, and by 2004 was deemed “significantly underfunded,” according to the lawsuit. Two years later, the state warned “that failure to take efforts to ensure the long-term viability of the group trust and to limit the group members’ exposure to long-term and unexpected financial liability would result in the termination of Builders’ [trust] as a self-insurer,” the lawsuit states.

After an attempt at repair failed to get the trust to the “break-even or better” point by 2007, it ceased offering workers’ compensation insurance. Two years later, with “less than 12 months’ cash available to pay claims and expenses,” the state stepped in and took over administration of the trust, the lawsuit says.

An outside firm brought in to conduct a forensic analysis of the trust initially put the gross deficit at $20.38 million, but updated that to $11.98 million as of September 2012, according to the lawsuit.

Broken trust

The complaint says the Workers’ Compensation Board entered into settlement agreements with many of the trust’s former members, but “these settlement agreement monies are still not enough to meet all of the obligations of the trust.” Former members who chose not to settle were sued by the board in August for their share of the deficit. That lawsuit listed more than 200 defendants.

The lawsuit against LaRocque accuses him of breach of contract for failing in his duties as a trustee, “including but not limited to failing to provide for the proper capitalization of Builders’ [trust], setting improper contribution rates, and failing to comply with Builders’ membership requirements in relation to the admission and removal of members, and failure to prevent inherent conflicts of interest.”

It also accuses him of fraud for “material misrepresentation of fact, with the intent to deceive the trust and Builders’ members and to induce the trust and its members to act on these misrepresentations.”

As a result, the lawsuit says, the trust was damaged, as was the Workers’ Compensation Board, as successor in interest to the trust.

The complaint asks for $11.98 million in damages against LaRocque, along with punitive damages.

The builders’ trust was not the only one in the state to fail: A Jan. 1 report on the Workers’ Compensation Board website lists nearly 60 group self-insurance trusts as “inactive,” either designated as insolvent or winding down operations under state supervision. Just three trusts are listed as being authorized to offer workers’ compensation coverage this year.

Changes to state law that took effect in 2012 tightened regulations on existing trusts and closed the door on the formation of new ones.

 
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