Andrews v. Emerald Green Pension Fund, Civil No. 98-436-P-H (D. Me. 9/27/2000)
| Decision Date | 27 September 2000 |
| Docket Number | Civil No. 98-436-P-H. |
| Parties | DAVID ANDREWS, RICHARD DINGWELL and RAYMOND ST. LAURENT, Plaintiffs, v. EMERALD GREEN PENSION FUND; GALEN C. SHAWVER; AUMAN W. JOBE; MICHAEL CASSIDY; COMMERCIAL MORTGAGE & ASSOCIATES, INC.; CLYDE BEVERLY; SHUKU INTERNATIONAL; STEVEN BROOKS and JERRY L. REVALEE, Defendants. |
| Court | U.S. District Court — District of Maine |
DAVID J. PERKINS, ESQ., PERKINS, OLSON & PRATT, P.O. BOX 449, PORTLAND, ME 04112, (207) 871-7159, for DAVID ANDREWS, plaintiff, RAYMOND ST LAURENT consolidated plaintiff, RICHARD DINGWELL, consolidated plaintiff.
SAMUEL SHERRY, ESQ., METROPOLITAN LEGAL CENTER, PA PO BOX 18201, PORTLAND, ME 04112, (207) 799-8485 RONALD TANET, ESQ., 1615 POYDRAS STREET, SUITE 850, NEW ORLEANS, LA 70112, (504) 529-1931, for EMERALD GREEN PENSION FUND, defendant, GALEN C SHAWVER, defendant, CLYDE BEVERLY, default defendant, COMMERCIAL MORTGAGE & ASSOCIATES INC., defendant, SHUKU INTERNATIONAL, default defendant
MICHAEL CASSIDY, defendant, [PRO SE] 198 WASH POND ROAD, HAMPSTEAD, N.H. 03841, (603) 329-4991
STEVEN BROOKS, default defendant,[PRO SE] 1141 WATTS AVENUE, UNIVERSITY CITY, MO 63130, (314) 212-4016.
MICHAEL A. NELSON, ESQ. JENSEN, BAIRD, GARDNER & HENRY, P.O. BOX 4510, PORTLAND, ME 04112, (207) 775-7271, for JERRY L REVALEE, defendant/cross-defendant.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
On May 8-11, 2000 and on June 16, 2000, I conducted a bench trial in this lawsuit. The defendants Clyde Beverly and Steven Brooks were previously defaulted. ShuKu International was defaulted at trial. Their liability is therefore considered established.1 See Libertad v. Sanchez, 215 F.3d 206, 208 (1st Cir. 2000). The plaintiffs have settled with the defendants Emerald Green Pension Fund2 and Commercial Mortgage & Associates, Inc. and these two defendants have stipulated to entry of judgment against them on Count XIX, with all remaining counts being DISMISSED. The defendant Jerry Revalee has stipulated to entry of judgment against him on Counts I through VII, XV, XVII and XVIII in favor of David Andrews in the amount of $50,000, plus interest, and in favor of Raymond St. Laurent in the amount of $187,500, plus interest. Revalee has also stipulated to entry of judgment for no more than $237,500 on Galen Shawver's cross-claim seeking contribution as to the amounts David Andrews and Raymond St. Laurent sent to bank accounts in the First Tennessee Bank, with all remaining claims and cross-claims against Jerry Revalee being DISMISSED. The plaintiffs have dismissed without prejudice their claims against Auman Jobe. The only remaining defendants whose liability is in question are Michael Cassidy and Galen C. Shawver.
These are my findings of fact and conclusions of law under Fed.R.Civ.P. 52.
1. The plaintiffs David Andrews, Richard Dingwell and Raymond St. Laurent are residents of the State of Maine. The defendant Michael Cassidy is a resident of the State of New Hampshire. The defendant Galen C. Shawver is a resident of the State of North Carolina.
2. Galen Shawver3 is the president and sole stockholder of Commercial Mortgage & Associates, Inc. ("CMA"). In 1996, CMA's primary business was to qualify borrowers for loans from The Money Store. Shawver had a mortgage banking license, which did not permit CMA to be a depository or trust institution. Shawver, however, held CMA out to be the custodial bank for the Emerald Green Pension Fund ("Fund").
3. Shawver created the Emerald Green Money Pension Plan, of which the Emerald Green Pension Fund Money Purchase Trust is part, in 1996. Although the pension plan's stated purpose was for retirement investment by employees of CMA, Shawver told Auman Jobe, the plan's administrator, that the plan was also designed to earn profits for outside investors. But under the plan's terms, only employees could contribute through payments made by their employer, CMA.
4. Shawver established a trust under the pension plan to hold the assets of the plan and any employer contributions made by CMA. CMA was trustee. Under the terms of the trust, the trustee was permitted to combine the trust's assets with any other trust established by CMA pursuant to a qualified employee benefit plan.
5. While nothing in either the trust or the plan authorized the trustee to permit investments by non-employees such as the plaintiffs, Shawver held out the trust for investment to outsiders as the Emerald Green Pension Fund Trust and himself as trustee.4 Although Shawver claims that there is a separate "common law trust" part of the pension plan that permits this, the only trust provided for in the plan document and trust agreement is the trust described above. That trust is solely for the benefit of the participating employees.
6. Shawver also ensured that those closest to the Fund would not or could not expose any illegality — he appointed Auman Jobe, a naïve and trusting individual, to be the plan's administrator despite his lack of experience with federal laws regarding ERISA. Shawver provided his accountant with only sparse accounting records for 1996, the year prior to the majority of the investment activity and the Fund did not even have a bookkeeping system. Finally, Shawver brought in an attorney with no experience with pension funds or ERISA for ostensible compliance purposes.
7. After creating this "investment opportunity," Shawver attempted to isolate himself from the investors he was supposed to serve as trustee. "Joint venture agreements" used in recruiting investors such as the plaintiffs stated that if they attempted to contact the trustee (Shawver), they would be assessed a $1,000,000 penalty and their investment contracts would be canceled. Investors like the plaintiffs were told that Shawver dealt with only major players rather than small-time investors like themselves.
8. Michael Cassidy5 had a NASD license that expired in 1990 and was not renewed. He has never had a license to sell securities in Maine, and has never registered to be an investment advisor or broker dealer in Maine, New Hampshire, or Massachusetts.
9. In 1997, Cassidy opened a New Hampshire bank account under the name of ShuKu International, a foreign trust that he formed and for which he claims to be an agent. Beginning in October 1997, that account received and sent a number of wire transfers, sometimes totaling over $200,000 in one month. Cassidy often used this account to send his clients' investments in the Fund.
10. Cassidy and his wife collectively report taxable income of $20,000 (or less) per year for a family of four. Cassidy has transferred ownership of his home to his brother for no consideration, but still pays the mortgage each month.
Despite his ostensibly limited means, Cassidy is able to afford regular trips to the Caribbean to participate in investment seminars. Cassidy has regularly withdrawn a substantial amount from ShuKu International's account through petty cash each month for "trust expenses." By November, 1998, the ShuKu International account had a balance of only $1.27.
11. Cassidy's initial connection with the Fund was through Clyde Beverly.
Beverly told Cassidy about Shawver and the Fund. Beverly also provided Cassidy with joint-venture agreements and the letters of intent that Cassidy had "investors" sign before sending their money to the Fund's accounts. Beverly also provided Cassidy with some of the wiring instructions for the plaintiffs' initial investments. Cassidy began soliciting investors on behalf of the Fund and both he and Beverly sent many investors' money into the Fund's account.6
12. In the Fall of 1997, a nonparty, Al Sargent, introduced Cassidy to the plaintiffs David Andrews and Raymond St. Laurent at a restaurant in Massachusetts. At that meeting, Cassidy told Andrews and St. Laurent that he was a licensed security broker and a student of international finance. He told them that he could arrange investments that were not available to the common investor such as a North Carolina pension fund he represented that had an ERISA-qualified trustee. Cassidy said that this fund had been consistently producing income for over one and one-half years and would continue to provide substantial returns. Andrews and St. Laurent trusted Cassidy because he knew Sargent. They did not conduct any further research into his background.
13. After that meeting, Cassidy telephoned Andrews and St. Laurent several times at their homes in Maine. Cassidy told them that their funds would be invested in a manner that would yield a high rate of return, certainly no lower than 8% to 12% per month and, if they maintained their investment for two to three months, potentially as large as 300%. Cassidy also said that the defendant Galen Shawver owned a bank and was the trustee of the pension fund he was describing. In response to questions about the security of their funds, Cassidy told Andrews and St. Laurent that their funds would be guaranteed by one of the top twenty-five banks in the world and would be protected by an insured bank account, with bonding to protect against any loss. Cassidy explained that the pension fund was operated under Shawver's banking license, and that Shawver had several such licenses. Cassidy also told Andrews that he himself had been doing business with the Fund long enough to receive a payout from it.
14. The plaintiff Richard Dingwell was at St. Laurent's house during a December, 1997 phone call when Cassidy made similar representations. During this conversation, Cassidy said that the fund was called the Emerald Green Pension Fund and described it as a vehicle for trading bank debentures. The plaintiffs understood that Cassidy represented the Fund.
15. Despite his statements to the three plaintiffs, Cassidy knew that there had never been a payout from the pension fund, that the fund assets had never...
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