Lawsuit Against River City Order of Police for “Ponzi Scheme” Death Benefits

On April 8, 2019, a class action lawsuit was filed against the River City Fraternal Order of Police in Jefferson County because of the loss of death benefits.

Officers from the old Jefferson County police force were first offered a special death insurance-like program by their union in 1991. They stopped taking new members, however, when the county and city police departments merged with their unions. The benefit worked like a supplemental insurance policy. For decades, officers paid $10 a month for a $10,000 payout in the event of their passing. The money was supposed to go to their loved ones to help with funeral expense.

In February, police officers received a letter stating they were losing the death benefit. According to the letter, all records, correspondence, and bank deposits for the Welfare Trust had been destroyed by a former lodge employee. The Fraternal Order of Police also revealed the Trust may not be legal. According to state staffers from the Kentucky Department of Insurance, the Trust could be in violation of state laws.

To remedy the situation, the union board voted to dissolve the Trust and give the members $2,000. This, however, will not help members’ families pay for the funeral expense in the future. Many of the members have reached an age where insurance companies may be unwilling to provide them with a policy.

Nearly 80 members remain in the Trust. A memo went out to those members stating the Fraternal Order of Police would be providing $1,200 per Trust member in order to give the impacted members $2,000. Those figures, however, suggest that there will be $64,000 left in the Trust. At this time, there is no criminal investigation.

The lawsuit is now being referred to as a “Ponzi Scheme.” Dan Coulter, 71, the lead plaintiff in the case, worked for the Jefferson County Police Department from 1971 to 1996. Tad Thomas, of Thomas Law Offices, is representing Coulter.

According to Thomas, “The FOP was taking in the money, using that to pay premiums to a real insurance company and then at some point and time, decided those premiums are too expensive: ‘We’ll just collect the money and then pay out death benefits as needed.’ And that would be the definition of a Ponzi scheme, because whoever gets paid out first gets full payment. Whoever gets paid out last never gets paid.”