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UNITED STATES v. MASON TENDERS DIST. COUNCIL OF GR

May 15, 1995

UNITED STATES OF AMERICA and ROBERT B. REICH, Secretary of the United States Department of Labor, Plaintiffs, against MASON TENDERS DISTRICT COUNCIL OF GREATER NEW YORK, et al., Defendants.


The opinion of the court was delivered by: SWEET

 Sweet, D.J.

 Plaintiffs, the United States of America and Robert B. Reich, Secretary of the United States Department of Labor (collectively the "Government") moved for an order pursuant to Rule 56, Fed. R. Civ. P., granting them partial summary judgment on Claim V (against defendants James Lupo ("Lupo") and Joseph Fater ("Fater"), and Claim VII (against Fater), which charge ERISA violations based on the Pension and Welfare Funds' purchase of the 18th Street building in Manhattan and 6060 Indian Creek in Miami Beach, Florida.

 Defendant Fater has moved for partial summary judgment on the Fifth and Seventh Claims for Relief sought by the complaint, insofar as the claims allege that he breached his fiduciary duties as a trustee of the Mason Tenders District Council's Pension Fund and Welfare Fund.

 For the following reasons, the Government's motion is granted and Fater's cross-motion is denied.

 The Parties

 Lupo and Fater are two former Trustees of the Mason Tenders District Council of Greater New York Pension and Welfare Fund (collectively the "Trust Funds").

 The Mason Tenders District Council represents workers throughout New York City and on Long Island who perform numerous laborer jobs including general labor, brick hauling, and asbestos removal. The District Council also holds and administers, jointly and with contributing employers, seven multi-million dollar trust funds. The Trust Funds are "employee benefit plans" within the meaning of the Employee Retirement Income Security Act ("ERISA") § 3(3), 29 U.S.C. § 1002(3). The District Council Pension and Welfare Fund are two of the largest Trust Funds. The Pension Fund collects contributions from employers in order to provide pensions to retired members of the Locals. As of 1992, the Pension Fund covered more than 6,600 current and retired union members and had assets of more than $ 180 million. The Welfare Fund pays medical benefits to members and retirees of the Locals and their families. In 1987, the Welfare Fund had net assets of approximately $ 30 million; by 1992, the Welfare Fund had net assets of less than $ 15 million.

 Prior Proceedings

 The complaint in this action was filed in September 1994. Summary judgment against these defendants on these counts was requested in a motion filed by the Government on November 1, 1994. On consent of all parties the argument on these claims against Fater and Lupo were adjourned until February, 1994.

 On January 6, 1994 Fater filed a cross-motion for partial summary judgment with respect to the same claims, five and seven.

 Argument was heard on these motions on February 22, 1995 and the motions were considered fully submitted as of that date.

 Facts

 The West 18th Street Property

 The Fifth Claim alleges that Fater and Lupo and the other Pension Fund trustees "caused the Pension fund to purchase the 18th Street Property from [the seller] for $ 24 million, which was $ 16.5 more that the seller had paid for the building less than ten months earlier."

 A report from DiFranco Realty dated December 29, 1989 appraised the value of the property at $ 15,950,000. A report from Diane Mistretta dated January 2, 1990 appraised the value of the property at $ 15,850,000. A report from Wasserman Realty Service dated January 4, 1990 valued the property at $ 8,300,000.

 On February 1, 1990 the Pension Fund loaned $ 15,850,000 to Ronald Miceli ("Miceli") to purchase the 18th Street building. On that same date Miceli purchased the building for $ 7,465,000.

 On November 13, 1990 the Pension Fund trustees met and approved unanimously the purchase of the 18th Street Property from Miceli, established a realty corporation to hold title to the property, named Fater President of the Corporation and authorized Gerard W. Cunningham ("Cunningham") to execute the purchase.

 Lupo attended the November 13 meeting. Fater was not present at the meeting and took no part in the vote. His counsel, Cunningham, was present at the meeting and presented the Real Estate Committee report which included the discussion of the 18th Street ...


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