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LaScala v. Scrufari

February 22, 2006

SALVATORE J. LASCALA, DOUGLAS A. JANESE AND RICHARD J. MARINO, INDIVIDUALLY, AS MEMBERS OF LOCAL 280, AND AS PARTICIPANTS AND TRUSTEES OR FORMER TRUSTEES OF THE NIAGARA-GENESEE & VICINITY CARPENTERS LOCAL 280 WELFARE FUND, PLAINTIFFS,
v.
SANTO S. SCRUFARI, INDIVIDUALLY AND AS PLAN MANAGER OF THE NIAGARA-GENESEE & VICINITY CARPENTERS LOCAL 280 WELFARE AND PENSION FUNDS, DEFENDANT.



The opinion of the court was delivered by: John T. Curtin United States District Judge

On January 15, 2004, this court issued its findings of fact and conclusions of law after trial finding that defendant Santo Scrufari, as Plan Manager of the Niagara-Genesee & Vicinity Carpenters Local 280 Welfare and Pension Funds, breached his fiduciary duties under ERISA sections 404(a)(1) and 406(b)(1) by paying himself unauthorized overtime salary, and "compensation weighted" fringe benefits based on this inflated salary, from the pay period ending March 26, 1989 to the pay period ending October 4, 1992. Remaining for determination is the amount of damages to be assessed as the result of these findings, in accordance with ERISA section 409(a).*fn1

To address this issue, the court initially directed counsel to confer and advise as to the items of damages upon which agreement could be reached (see Item 202). However, after receiving and reviewing the parties' various written proposals (see, e.g., Items 204, 205, 206, 219, 222, and 224), it became apparent that the parties had taken increasingly divergent positions as to the proper measure of damages, with little room for compromise. On December 9, 2005, the court once again met with counsel in an attempt to resolve the damages issue and bring this longstanding matter to final judgment without the need for further costly litigation, but no accord could be reached. The court then heard oral argument on the parties' proposals, and reserved decision.

The proposals are summarized briefly below, and the court's decision follows.

A. Defendant's Proposal

By letter dated October 14, 2004 (Item 219), defendant's counsel submitted his proposal for calculating damages as a function of (1) the unauthorized overtime salary Scrufari received during the relevant period, and (2) the corresponding Pension and Welfare Fund contributions made by his employer--i.e., the Funds--during the same period.

The letter briefly explains the amounts reported, and the methodology for the calculations made, as reflected in eight pages of attached exhibits.

Page 1 of the exhibits shows the amount of overtime hours credited (770.4 hours) and the corresponding salary paid to Scrufari for the period from January 1, 1989 through December 27, 1992, totaling $28,866.90. This document was prepared by the Funds' auditor. As explained in counsel's letter, the Pension Fund and the Welfare Fund, as separate trusts, shared the cost of the Fund Manger's salary, with 60 percent attributed to the Welfare Fund ($17,320.00) and 40 percent attributed to the Pension Fund ($11,547.00).

Page 2, also prepared by the auditor, reflects calculations of Pension Fund and Welfare Fund contributions made during the same period and attributed to the overtime salary paid to Scrufari. The totals are set forth as $6,894.58 in "Overtime Pension Contribution," and $8,346.41 in "Overtime Welfare Contribution."

Pages 3 and 4 report the Pension and Welfare Funds' investment earnings and returns for the period January 1, 1998 (Scrufari's retirement date) through December 31, 2003 (the approximate date of the court's decision after trial), as reflected in the actuarial valuation performed by O'Sullivan & Associates.

Page 5 represents defense counsel's calculation of damages to the Welfare Fund as the result of Scrufari's unauthorized overtime salary, plus interest, totaling $31,090.51. As explained in counsel's letter, interest was calculated for the period from June 30, 1992 to December 31, 1997, using the 1-year Treasury Bill judgment interest rates set forth at 28 U.S.C. § 1961.

Interest Was Calculated for the Period From January

September 13, 2004, using the corresponding rates of interest actually earned by the Fund as reported by O'Sullivan.*fn2

Page 6 represents defense counsel's calculation of damages to the Welfare Fund as the result of benefit contributions, plus interest calculated for the period from January 1, 1998 through September 13, 2004, totaling $11,491.23.*fn3 Based on these calculations, the combined total of damages representing unauthorized salary and corresponding benefit contributions attributable to the Welfare Fund is $42,581.74.

Page 7 represents defense counsel's calculation of damages to the Pension Fund as the result of unauthorized overtime salary, plus interest, totaling $20,337.11. Page 8 represents defense counsel's calculation of damages to the Pension Fund as the result of benefit contributions, plus interest, totaling $9,314.54. Based on these calculations, defendant submits that the combined total of damages representing unauthorized salary and corresponding benefit contributions ...


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