Raleigh, N.C. — Employees at about 100 small and mid-sized companies in the Triangle have to spend the holidays worrying about health insurance coverage after the contractor that handled their payroll and benefits administration closed unexpectedly.

The workers also might have to pick up the cost of any recent medical procedures, including surgeries, because Castleton Group isn't available to pay the bills.

Castleton ceased operations Tuesday as state federal authorities launched investigations into the company's finances. The state Department of Insurance determined the company's liabilities exceeded its assets by $6 million and that at least $8 million in payroll taxes were never paid to the IRS.

Neither Castleton owner Suzanne Clifton nor her attorneys returned repeated phone calls for comment. Clifton, who boasts of her business background and community accolades on the company Web site, also didn't answer the door at her Cary home.

"I'm very upset," said Jamie Rhodes, one of about 3,500 area employees whose health benefits were handled by Castleton.

Despite paying all her health insurance premiums, Rhodes found out that she likely will have to pay for her recent $15,000 knee surgery because Castleton can't pay the hospital or the surgeon.

"I couldn't do it right now. I mean, that's devastating," she said. "You're scared to death. I have a 5-year-old son also who's supposedly on this plan with me, and children get sick a lot."

Castleton's demise could spark a slew of civil suits by workers left uninsured. That would be in addition to the criminal investigations.

"The federal government is one of a number of creditors who get stuck when things go wrong with a company. It's just that, unlike other creditors, the federal government can put you in jail," said corporate attorney Jim Verdonik, who isn't involved in the Castleton case.

Turner Revels, who used Castleton to handle payroll and benefits for the 100 employees at Quality Equipment and Revels Tractor in Fuquay-Varina, said he hopes he can line up insurance for everyone by Jan. 1.

"It's a real blow to your whole being of trusting in people and trusting in business and doing the right thing," Revels said.