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Rose Valenti, et al v. the Penn Mutual Life Insurance Co.

March 29, 2012


The opinion of the court was delivered by: John G. Koeltl, District Judge:


This case involves an alleged conspiracy by the defendants to embezzle funds from the plaintiffs' ERISA pension plan (the "Plan"), in violation of 18 U.S.C. §§ 1964 and 664. The plaintiffs are Valenti, Ltd. (the "Company"), a cosmetics and fragrance concern, Rose Valenti, the president and founder of the Company and a Trustee of the Plan, Donald Valenti, her husband and a Plan Trustee, and various individual Plan participants (collectively, the "plaintiffs"). The defendants are Penn Mutual Life Insurance Company ("Penn Mutual") and its agent, Victor Mauro, and the Penn Pension Center ("Penn Pension"), and its president, Andrew Siegel (collectively, the "defendants"). Jurisdiction is proper pursuant to 28 U.S.C. § 1332 and 18 U.S.C. § 1964(c). The defendants have moved for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the reasons explained below, the motion for summary judgment is granted.


The standard for granting summary judgment is well established. "The court shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Gallo v. Prudential Residential Servs., Ltd. P'ship, 22 F.3d 1219, 1223 (2d Cir. 1994). "[T]he trial court's task at the summary judgment motion stage of the litigation is carefully limited to discerning whether there are any genuine issues of material fact to be tried, not to deciding them. Its duty, in short, is confined at this point to issue-finding; it does not extend to issue-resolution." Gallo, 22 F.3d at 1224. The moving party bears the initial burden of informing the district court of the basis for its motion and identifying the matter that it believes demonstrates the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323. The substantive law governing the case will identify those facts that are material and "[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

Summary judgment is appropriate if it appears that the nonmoving party cannot prove an element that is essential to the nonmoving party's case and on which it will bear the burden of proof at trial. See Cleveland v. Policy Mgmt. Sys. Corp., 526 U.S. 795, 805--06 (1999); Celotex, 477 U.S. at 322; Powell v. Nat'l Bd. of Med. Exam'rs, 364 F.3d 79, 84 (2d Cir. 2004). In determining whether summary judgment is appropriate, a court must resolve all ambiguities and draw all reasonable inferences against the moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587--88 (1986) (citing United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)); see also Gallo, 22 F.3d at 1223. Summary judgment is improper if there is any evidence in the record from any source from which a reasonable inference could be drawn in favor of the nonmoving party. See Chambers v. TRM Copy Ctrs. Corp., 43 F.3d 29, 37 (2d Cir. 1994). If the moving party meets its initial burden of showing a lack of a material issue of fact, the nonmoving party must produce evidence in the record and "may not rely simply on conclusory statements or on contentions that the affidavits supporting the motion are not credible." Ying Jing Gan v. City of New York, 996 F.2d 522, 532 (2d Cir. 1993); see also Scotto v. Almenas, 143 F.3d 105, 114--15 (2d Cir. 1998); Montalbano v. Port Authority of New York and New Jersey, --- F.Supp.2d ----, No. 10 Civ. 5973, 2012 WL 516150, at *1 (S.D.N.Y. Feb. 17, 2012).


The following facts are undisputed unless otherwise noted: Rose Valenti founded the Company in 1983. (Second Amended Complaint ("SAC"), at ¶ 10.) The Plan, a defined-benefit retirement plan covering all Company employees with two or more years of Company service, was established in 1988. (Def.'s R. 56.1 Stmt. at ¶4; Pl.'s R. 56.1 Stmt. at ¶ 4; see also Siegel Aff. Ex. 1 ("Amended Plan"), at PP 5187, PP 5189.) Rose Valenti and her husband Donald were the Trustees of the Plan. (Amended Plan at PP 5188.) The Plan's initial assets included a whole life insurance policy for Donald Valenti. (Def.'s R. 56.1 Stmt. at ¶ 9; Pl.'s R. 56.1 Resp. at ¶ 9.)

In 1994, the Valentis hired Penn Pension as a third-party administrator for the Plan. (See Def.'s R. 56.1 Stmt. at ¶ 6; Pl.'s R. 56.1 Resp. at ¶ 6; see also Siegel Aff. ¶ 4.) Penn Pension thereafter prepared the Plan's IRS Form 5500 tax returns for each fiscal year, and these prepared forms were provided to Rose Valenti. (See Siegel Aff. ¶ 4; see also Def.'s R. 56.1 Stmt. at ¶ 7; Pl.'s R. 56.1 Resp. at ¶ 7.) The contemporaneous Form 5500s and their supporting documents, including actuarial reports for each of the Plan years at issue, are in the discovery record in this case. (See, e.g., Seigel Aff. ¶¶ 11-58 & Exs. 3-12 (Form 5500s for tax years 1998 through 2008); see also Seigel Aff. Exs. 23-33 (Actuarial Reports for Plan Years 1998 through 2009).)

Also in 1994, the Plan purchased a Diversifier I Flex group annuity contract (the "Diversifier I") from Penn Mutual. (See Def.'s R. 56.1 Stmt. at ¶ 10; Pl.'s R. 56.1 Resp. at ¶ 10.) Thereafter, other assets were added to the Plan, in particular several other life insurance policies on the lives of the Valentis. (See Seigel Aff. ¶ 5; accord Pl.'s R. 56.1 Resp. at ¶ 15; see also Seigel Aff. Exs. 13-17, 19-22 (insurance policies, forms adding those policies to the Plan, annual statements on the policies).) The plaintiffs also assert that another annuity, the Diversifier II, which was issued to Rose Valenti in 1999, was an asset of the Plan. (See Pl.'s R. 56.1 Resp. at ¶¶ 10, 15.) With regard to the Diversifier I, Penn Mutual generated annual statements after the end of each fiscal year for the Diversifier I's performance, and sent these statements to Donald Valenti. (See Locker Aff. ¶ 4; see also Locker Aff. Ex. A (Diversifier I annual statements).) Penn Mutual retained original, contemporaneous copies of these annual statements and produced them during discovery in this litigation. (See Locker Aff. ¶¶ 3-4.)

The plaintiffs have conceded that the paper records produced in discovery regarding the Plan's accounts and the Diversifier I do not provide any evidence of embezzlement. (See Oral Arg. Tr. at 20 ("THE COURT: [I]f you accept, just for the present purpose, the paper records of the accounts, they all add up to the penny, including the withdrawals, the deposits, the beginning balances, the ending deposits, right? MS. ROSELL: Yes, these statements do, yes.").) However, the plaintiffs argue that the original paper records for the Diversifier I that were produced are not credible, and that Penn Mutual has falsely asserted that it is unable to produce for discovery the underlying original electronic records for the Diversifier I. (See Pl.'s R. 56.1 Resp. at ¶¶ 17, 20.) More broadly, the plaintiffs assert that values of the Plan that were reported by Penn Pension on the Form 5500 tax forms, and in other paper records, were falsified in order to conceal embezzlement from the Plan. (See, e.g., Pl.'s R. 56.1 at ¶¶ 46, 94.)

On July 28, 2008, the Valentis each sent letters to Penn Mutual requesting that their portions of the Plan be transferred to their accounts with Washington Mutual ("WAMU"). (See Siegel Aff. Exs. 47-48.) In a letter recounting the Valentis attempts to close their accounts, Mauro stated that he told WAMU that the Valentis' portions of the Plan could not be transferred to WAMU until the Plan was successfully terminated "because, as owners and sponsors of the Plan, monies must first go to satisfy the vested interest of their employees." (Seigel Aff. Ex. 49 (Letter dated June 15, 2009 of Victor Mauro ("Mauro Letter")), at 1; see also Siegel Aff. ¶ 59.) There is no evidence in the record indicating that the Valentis authorized the termination of the Plan before September 2008, when the stock market dropped precipitously. The evidence in the record shows that the Diversifier I lost significant value during that period, (see Locker Aff. Ex. A at PM 00067), however, the plaintiffs assert that the Plan "did not incur losses as a result of the stock market crash" but rather "incurred losses as a result of defendants' embezzlement." (Pl.'s R. 56.1 Resp. ¶ 97; see also Pl.'s R. 56.1 Resp. ¶¶ 23-24.)

Rose Valenti and Andrew Siegel of Penn Pension exchanged correspondences concerning the termination of the plan beginning in October, 2008. (See Siegel Aff. ¶¶ 59-64 & Exs. 50-60.) Valenti accused Penn Pension of not promptly transferring her portion of the Plan to WAMU, and asserted that Penn Pension was responsible for the Plan's lost value. (Siegel Aff. Ex. 51.) Siegel replied that Penn Pension was the third-party administrator of the Plan and had nothing to do with the investment or processing of the assets of the Plan, and repeated that funds could not be transferred until the Plan was properly terminated. (Siegel Aff. Ex. 52.) The record indicates that Penn Pension was still receiving releases from the Plan participants as late as June, 2009. (See, e.g., Siegel Aff. Ex. 56 at PP 3722; see generally Siegel Aff. ¶ 63.) The Plan made its final distribution in September, 2009. (See Siegel Aff. Ex. 59 at PP 3558.)

The plaintiffs assert that the termination discussions actually began in January, 2008, and the discovery record confirms that there was a meeting between Seigel, Mauro, and Rose Valenti in January, 2008. (See Pl.'s R. 56.1 Resp. ΒΆ 98; Rosell Decl. Ex. 64.) More broadly, the plaintiffs assert that the defendants intentionally delayed in terminating the account so that they could take advantage of losses in ...

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