Conviction of Former Benistar Chairman Vacated; Company Awarded $12.6M against PaineWebber

STAMFORD, CT - BENISTAR, one of the nation’s largest administrators of health and welfare benefit plans, yesterday received a double dose of good news.

The July 2005 federal mail and wire fraud conviction of BENISTAR founder and former chairman Daniel E. Carpenter was thrown out by Boston federal judge George A. O’Toole, Jr., primarily because government prosecutors engaged in prejudicial conduct.

In addition, BENISTAR was awarded $12.6 million in a National Association of Securities Dealers, Inc. (NASD) arbitration proceeding against UBS PaineWebber, Inc. (PaineWebber) regarding the transactions that were the focus of the criminal prosecution against Mr. Carpenter. The NASD ruling determined that PaineWebber’s actions were responsible for the losses in this case.

“The court held that because the government’s case was not ‘strong,’ its prejudicial closing argument that referred to stock options investments as ‘gambling’ warranted a new trial,” said Attorney Robert M. Goldstein, who with Attorney Martin G. Weinberg, represented Mr. Carpenter in Boston. “This is also vindication for all of the loyal BENISTAR employees, customers and business partners who stood by BENISTAR and Mr. Carpenter during this ordeal,” Weinberg added.

“The NASD ruling is a complete exoneration for BENISTAR and Mr. Carpenter. The company and Mr. Carpenter have been unfairly tarnished by litigation arising from this matter, which has been drawn out for more than five years,” said Richard S. Order, an attorney in Axinn, Veltrop & Harkrider LLP’s Hartford, Connecticut office who represents BENISTAR.

From 1998 to 2000, a company called BENISTAR Property Exchange acted as a qualified intermediary for like-kind exchanges under section 1031 of the Internal Revenue Code. The provision allows taxpayers to defer payment of capital gains taxes on the sale of investment property by rolling sales proceeds into the purchase of new property.

Although BENISTAR Property successfully handled over $100 million of like-kind exchanges for 119 clients, approximately $9 million of the funds from seven clients were lost when PaineWebber abruptly shut down BENISTAR Property’s investment accounts in December 2000. It was this action that the NASD found was wrongful and resulted in the arbitration award to BENISTAR of $12.6 million.

BENISTAR maintains its corporate headquarters in Simsbury, Connecticut just outside of Hartford (CT). BENISTAR also has regional offices in Stamford (CT), Chicago (IL) and Charlotte (NC). As an industry leader in employee welfare benefit administration, BENISTAR provides professional administrative services for over 1,500 corporate clients with an aggregate employee base of over 250,000. For more information about BENISTAR, please visit www.BENISTAR.com

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BENISTAR Company Contact:
Jack E. Robinson, General Counsel, T: (203) 952-8219