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Rod Smith

Binion's Targeted for Insurance Probe

2 February 2004

LAS VEGAS -- Binion's Horseshoe and its owner, Becky Binion Behnen, are being investigated by the U.S. Department of Labor for possible violations of federal law involving $2.5 million in unpaid worker health insurance claims, officials said Friday.

The investigation, possibly criminal as well as civil, was opened about two years ago after employees complained the hotel-casino's health insurance was not paying their medical bills even though the gaming company was deducting insurance premiums from their paychecks, said David Ganz, deputy regional administration of the department's Employee Benefits Security Administration.

Ganz said there is a similar open and ongoing investigation into the nonpayment of medical claims filed by non-union employees of the bankrupt Castaways, which closed Thursday afternoon after creditor Vestin Mortgage began seizing cash and assets at the hotel-casino.

Sal Gugino, attorney for the Castaways, declined to comment Friday other than to confirm there is an ongoing federal investigation into the nonpayment of insured medical expenses.

The Horseshoe was self-insured before being forced to close on Jan. 9. The gaming company retained Las Vegas-based administrative services company Mediversal to manage its health care program for workers but never turned over any funds to cover valid worker medical costs.

"When a health plan does not pay a claim, the fiduciary has an obligation to make sure the claim is paid. In this case, the fiduciary is Binion's and Becky," Ganz said.

Ganz said the failure of the Horseshoe to cover worker medical costs violated provisions of the Employee Retirement Security Act of 1974, or ERISA, but he declined to say whether the violations were criminal or civil, pending the closing of the case.

He said the Office of the Solicitor in the Department of Labor is very involved in the case. However, under the complex provisions of ERISA, he said, former employees have better standing to file lawsuits than the department does to file complaints.

A number of former Horseshoe employees have said they are considering filing class-action lawsuits, but it is believed none has been filed to date.

Behnen said in a statement Friday that she apologizes "for any inconvenience caused by this situation and ask(s) employees facing these claims to be patient while we work to negotiate a fair settlement."

She added she expects the medical payments to be made once the proposed deal to sell the Horseshoe to Harrah's Entertainment closes.

"We are actively working with medical-care purveyors to settle these claims. The agreement would include a release of all claims and other legal actions against the employees," Behnen said.

Ganz said the Labor Department's main goal is to protect the workers and their benefits, and he said the department has been working with the Horseshoe's human resources department to make certain the estimated 1,000 non-union workers affected by the medical crisis are ultimately paid.

"Binion's HR department has done a nice job of organizing and documenting claims, and will soon have all of them adjudicated," he said.

Ganz also said his agency has recently been in contact with Harrah's Entertainment and has been assured all legitimate claims will be covered if the sale of the Horseshoe is consummated.

Harrah's reached a definitive agreement Jan. 23 to buy the Horseshoe from Behnen for an estimated $50 million, most of it in the form of assumed liabilities of the landmark downtown property.

"They've confirmed these claims are part of the legitimate claims that would be paid if the sale goes through. We've talked with them specifically about the medical claims," Ganz said.

Harrah's spokesman Gary Thompson said all bona fide claims will be honored if the sale goes through, but he declined to comment on individual obligations.

"There are a lot of creditors out there. For us to comment on each one during the due diligence is not fair to us or to them," he said.

Thompson said Harrah's is moving "as quickly as possible to complete our due diligence, which will allow us to file our applications with the state Gaming Control Board and the Gaming Commission."

Sources said all parties are working toward the goal of completing the transaction "in a matter of weeks," possibly by early March.

If the sale to Harrah's does not go through, Labor Department spokeswoman Deanne Amaden said, the agency will continue to seek payment for the workers, either through negotiations with another buyer or through possible litigation.

Some of the former non-union employees, who could number up to 1,000 during the past two years, have been forced to file for bankruptcy protection, had their credit ratings wrecked or had to pay their medical bills themselves despite paying for insurance coverage.

The insurance problems have been especially hard on some of Binion's former employees.

One former Binion's employee with a wife and three children said his wife had to have a Caesarean section to deliver their fourth child who was then in neonatal care at University Medical Center for 10 days. Despite having premiums deducted each pay day, they were left with the tab for more than $20,000 after their claims went uncovered.

The wife of another former employee who was involved in the initial complaint against the Horseshoe, however, said the downtown property's handling of the medical issue was more than just a case of bad faith.

"In my opinion, it's just like a fraud and embezzlement issue. When you have families with five children, like myself, and they pay their co-pay and later you get the bills, it's just criminal," she said.

In addition to concerns about medical coverage, former Horseshoe employees have expressed concerns that money paid into their 401(k) accounts has not been made available.

Ganz, however, said the paperwork for retrieving 401(k) funds is complex and time consuming, and it usually takes months rather than weeks to get the money.

As of a month ago, Ganz said, the funds were being managed appropriately and should be available to former Horseshoe employees.

"If we were to find out employee withholdings to the 401(k) were not forwarded to the trustee where they're supposed to be invested, we'd be on the next plane," Ganz said.

He also said employees should monitor their 401(k) accounts closely, and if they have any questions call 415-975-4600, ext. 113.