Topel Forman News

Today’s Fraud Topic (May 4, 2018)

Is organized crime harming your business?

When most people think of organized crime, they imagine unsavory activities conducted in a murky underworld — one that doesn’t affect them. But organized crime is involved in other activities, such as labor racketeering, that lead to diminished competition, reduced wages and higher costs, all of which can affect legitimate businesses.

Ripples reach far

Much of organized crime’s labor racketeering efforts have been concentrated in unions. But there is a ripple effect that touches politics, financial markets, major industries and, in some cases, individual businesses.

Shady benefits service providers are particularly alarming, because they can cause substantial financial losses by affecting multiple plans. Plus, they’re sophisticated enough to conceal their activities through complex financial machinations. Recently, five individuals were sentenced for their roles in a wide-ranging $70 million Ponzi scheme. Approximately $1.9 million of that amount was stolen from an Employee Retirement Income Security Act (ERISA)–covered employee pension plan.

Unfortunately, it’s difficult for employers to tell when their providers aren’t on the up-and-up. If something doesn’t ring true, however, talk to a trusted financial advisor to learn more about how things are supposed to work. A plan administrator who’s evasive or can’t easily answer questions about the plan, for example, or an account that doesn’t appear to be performing to your expectations merits closer attention. Even if such concerns are unrelated to organized crime, they should be addressed and, if necessary, corrected.

Fight goes on

Catching racketeers can be difficult. Organized crime takes pains to remain invisible while it affects legitimate businesses. Businesses, in turn, may not be aware that organized crime is part of the reason the cost of their benefits is rising.

Federal authorities are well aware of the influence organized crime wields. In recent years, as FBI resources have increasingly been diverted to antiterrorism efforts, the Department of Labor’s Office of Inspector General (OIG) has taken a more prominent role in combating organized crime. To report suspicious activities, visit the OIG’s site at For questions about fraud or help evaluating employee benefit plans, contact us.


© 2018

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