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Fired McDonald's exec alleges company condoned 'illegal insurance scheme'

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Fired McDonald's exec alleges company condoned 'illegal insurance scheme'

A former McDonald's senior insurance director alleges that the company condoned an “illegal insurance scheme” regarding insurance policies for Happy Meal promotions.

In an age discrimination lawsuit filed May 1, James Kasprzyk charges that a company affiliated with McDonald's makes Happy Meal toys and another McDonald's-affiliated company insures them.

That company, McDonald's Owner/Operator Insurance Co. (MOOIC), is controlled by McDonald's employees, including Vice President of Insurance Larry Long, Mr. Kasprzyk's former direct supervisor, according to the lawsuit.

Mr. Kasprzyk, 59, was on the MOOIC board of directors, according to his lawsuit, “but was not actively involved in the activities of the company.”

The insurance policies are meant to compensate individual restaurants if their investments in Happy Meal promotions don't pay off as expected. Mr. Kasprzyk's Chicago-based attorney, Erika Pedersen, said her client is not alleging that restaurants were harmed or cheated by the setup, but that the insurance policies were negotiated and structured in illegal ways. The lawsuit says the setup violates insurance law and federal income tax law because the coverage “is not negotiated at arms' length, does not truly involve any transfer of risk, and the premiums are not negotiated in Bermuda where the company is licensed.”

The lawsuit says the supervisor, Mr. Long, negotiated the policies. “Long often remarked that the insurance company, MOOIC, was not really an insurance company and they were just moving money from one pocket to another inside the McDonald's system, or words to that effect," the lawsuit states. “Long even joked about spending time in prison if the scheme was ever discovered.”

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Mr. Kasprzyk was terminated in February 2012. In the suit, he says he was dismissed after he gave an interview to a trade journal about an insurance issue unrelated to the Happy Meal situation. But the interview was done with the approval of higher-ups and was not controversial, according to the suit.

Mr. Kasprzyk alleges that the real reason was his age, and notes he was replaced by a “younger, less-qualified person.”

The lawsuit cites the insurance setup — along with an employee who referred to the McDonald's CEO as “Hitler” and slept on the job — as “examples of things most people would agree are far more serious than anything Jim was told he had done,” said Ms. Pedersen. “It shows McDonald's didn't truly think Jim had done anything wrong, because it had tolerated far more serious activities.”

Mr. Kasprzyk was based at the company's Oak Brook headquarters, and the lawsuit was filed in U.S. District Court in Chicago. A McDonald's representative said the company does not comment on pending litigation, and Mr. Kasprzyk declined to comment.

Kari Lydersen writes for Crain's Chicago Business, a sister publication of Business Insurance.