Casper v. Paine Webber Group, Inc.

• Citation: 787 F. Supp. 1480
• Decision Date: 02 March 1992
• Docket Number: Civ. A. No. 90-4894 (AJL).
• Parties: Jeanne C. CASPER, Plaintiff, v. PAINE WEBBER GROUP, INC., a Delaware corporation, Painewebber Incorporated, a corporation and Ronald M. Schwartz, Defendants.
• Court: U.S. District Court — District of New Jersey

787 F. Supp. 1480

Jeanne C. CASPER, Plaintiff, v. PAINE WEBBER GROUP, INC., a Delaware corporation, Painewebber Incorporated, a corporation and Ronald M. Schwartz, Defendants.

Civ. A. No. 90-4894 (AJL).

United States District Court, D. New Jersey.

March 2, 1992.

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Robert S. Ellenport, P.A., Clark, N.J., for plaintiff.

Sheldon M. Finkelstein, Hannoch Weisman, Roseland, N.J., for defendants.

OPINION

LECHNER, District Judge.

This is an action brought by plaintiff Jeanne C. Casper ("Casper") against her former employer PaineWebber Incorporated ("PaineWebber Inc."), its parent company Paine Webber Group, Inc. ("Paine Webber Group") and Ronald M. Schwartz ("Schwartz"), Casper's former supervisor (collectively, the "Defendants"), for alleged violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961 et seq., the Equal Pay Act (the "EPA"), 29 U.S.C. § 206, and New Jersey common and statutory law. Diversity and federal question jurisdiction are alleged pursuant to 28 U.S.C. § 1332 and § 1331.

The Defendants move to dismiss the Amended Complaint (the "Amended Complaint").¹ For the reasons set forth below, the motion is granted in part and denied in part.² Counts One through Five and Count Seven of the Amended Complaint are dismissed. The motion to dismiss is denied with respect to Count Six and Counts Eight through Fourteen.

Facts

Casper is a resident of Milltown, New Jersey. Amended Complaint, ¶ 7. Paine Webber Group is a securities firm which is incorporated in Delaware and which has its principal administrative and business offices in New York, New York. Id., ¶ 8. The Amended Complaint alleges Paine Webber Group has done and is doing business in New Jersey. Id., ¶ 8. PaineWebber Inc. is a non-New Jersey corporation maintaining its principal place of business in New York, New York and has done and is doing business in New Jersey. Id., ¶ 9. It is the wholly owned subsidiary of Paine Webber Group. Id. The Amended Complaint alleges, on information and belief, Schwartz is a resident of New York and has transacted and does transact business in New Jersey. Id., ¶ 10.

The Amended Complaint alleges Casper was employed by PaineWebber Inc. as Compensation Director from approximately June 1987 to September 1989. Id., ¶ 48. It alleges she was promoted to Corporate Vice President of PaineWebber Inc. in September 1989 and retained that position until 22 December 1989 when Casper was placed on administrative leave. Id., 48, 89-92. On 23 February 1990, PaineWebber Inc. notified Casper she was being terminated from administrative leave and would be paid only through 31 December 1989. Id., ¶¶ 48, 89-93.

The Amended Complaint alleges Paine Webber Group and its operating subsidiaries, including PaineWebber Inc., formed and implemented an unlawful scheme "beginning not later than" 30 September 1986 "with respect to employee compensation" (the "Overriding Scheme"). Amended Complaint, ¶ 11. It alleges that on information and belief, this scheme continues "to this date." Id., ¶ 17. The Overriding Scheme was allegedly implemented and furthered by means of "numerous schemes which included schemes to defraud by use of the mails and interstate wires, including the hiring of Casper by such means, securities fraud, coercion, violations by means of mail and wire fraud of numerous laws regarding employment compensation, and other wrongdoing," referred to in the Amended Complaint as "Implementing Schemes." Id., ¶ 11. The Amended Complaint states:

The goal of the Overriding Scheme to defraud and the various acts in furtherance of the Overriding Scheme was to avoid compliance with various federal, state and local laws that would have resulted, had they been complied with, in increased tax payments and costs to Paine Webber Group and PaineWebber Inc. and in reductions in after-tax compensation to certain highly-placed executive officers of said Defendants and to certain employees who produced high volumes of business.

Id., ¶ 12.

The Amended Complaint alleges various smaller schemes were implemented in order to further the goals of the Overriding Scheme. It alleges that in or about April 1987, PaineWebber International ("PaineWebber International"), a division of PaineWebber Inc., hired a broker in Puerto Rico. Id., ¶ 22. It alleges that "rather than calling the broker's income a bonus/salary which would be employee compensation subject to income tax and employer contributions, PaineWebber Inc., by and through its authorized employees including Defendant Schwartz directed that the transaction be characterized as a `purchase of assets.'" Id., ¶ 22. PaineWebber Inc. allegedly achieved illegal tax savings by reporting the broker's income in this manner. Id.

In addition, the Amended Complaint alleges that between 1987 and 1988, PaineWebber International advised the "Compensation Division in New York" that various employees of the Defendants who worked in the London office worked "`offshore' of Great Britain and therefore had no liability for Inland Revenue taxes to Great Britain." Id., ¶ 25. It alleges that such advice resulted in tax reductions to those employees and to the Defendants. Id.

Other alleged schemes subsumed by the Overriding Scheme include:

(i) under reporting and improper reporting of employee compensation to the Internal Revenue Service and other tax authorities, (ii) withholding of bonuses and deferred compensation to certain employees involved in divorce proceedings so that such bonuses and deferred compensation would only be reported after the divorce proceeding was settled or resolved, (iii) paying compensation without proper authorization and/or full disclosure pursuant to applicable federal and state securities laws and Securities and Exchange Commission rules and regulations and (iv) purchasing the homes of employees who were to be geographically relocated at prices higher than the respective appraised values of such homes, but not declaring as employee compensation the difference paid over the appraised value.

Id., ¶ 30.

The Amended Complaint states the unlawful acts perpetrated in furtherance of the Overriding Scheme included "acts of mail and wire fraud in connection with the hiring, employment, and firing of Casper and acts of coercion in connection with her course of employment." Id., ¶ 18. It alleges: "Prior to Casper's hiring in June of 1987, Defendants faced an increasing danger that their Overriding Scheme and racketeering activity in furtherance thereof might be discovered." Id., ¶ 32. It states: "The circumstances evidencing the increasing danger of discovery faced by the Defendants and all those involved included, but were not limited to, the audit of expatriate employees by Great Britain's Inland Revenue and the need to conform all compensation and benefit plans and programs to recent changes made by the 1986 Tax Reform Act." Id., ¶ 33.

The Amended Complaint alleges that accordingly, "in early or mid-1987, the Defendants decided that they should take action which would create the appearance that genuine efforts were being made to stop all unlawful practices like those described above." Id., ¶ 34. It alleges the "Defendants decided the best way to create such an appearance would be to hire from outside the company a new well-qualified person to serve as director for the department in charge of compensation matters" at PaineWebber Inc., because "that department was responsible for overseeing many of the employee tax and other matters which had come under increasing scrutiny." Id., ¶ 34. It states: "The employment of the Director would create the impression that top management was not involved in or previously aware of the unlawful activities, was very concerned about them and genuinely intended that they stop." Id., ¶ 36.

The Amended Complaint states Casper was hired because "she had a good reputation, had never been employed by Paine Webber Group or any of its subsidiaries and affiliates, and was a highly trained and experienced manager, with expertise in the area of employee compensation and benefits and employee relations." Id., ¶ 37. It alleges the scheme was furthered through a "`reassignment' technique," whereby the Defendants "assigned Casper to `clean up' one unlawful practice, and then reassigned her to another before the first type of practice had been corrected." Id., ¶ 50. It further alleges: "When the `reassignment' technique ultimately failed to completely stymie Casper's efforts to identify and attempt to correct the Defendants' illegal activities, the Defendants began to use more aggressive and coercive methods against Casper, including a systematic course of de facto demotions and changes in the nature of her employment, and ultimately, the firing of Casper." Id.

The Amended Complaint alleges that in or about April 1987, Casper travelled from New Jersey to PaineWebber Inc. offices in New York, New York to interview for a position at PaineWebber Inc. It alleges the "interview ... had been preceded by and arranged using communications through the U.S. mails and over interstate wire facilities." Id., ¶ 42. The Amended Complaint states that during the course of the interview, Schwartz fraudulently represented:

a. That the Defendants were genuinely concerned about a variety of `administrative' practices which they had previously been unaware of but had recently discovered and which required modifications and corrective procedures and controls.

b. That the Defendants intended to `clean up' such activities, and would fully support Casper's efforts to accomplish the necessary changes; to wit, Casper would be given all appropriate resources including additional staff and computer hardware.

c. That one of the reasons for Casper's hiring and one of her responsibilities was the review of all tax practices and other practices which pertained to employee compensation matters, and the revision of any

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