Whitfield v. Tomasso, CV 84-4280.
| Decision Date | 14 April 1988 |
| Docket Number | No. CV 84-4280.,CV 84-4280. |
| Citation | 682 F. Supp. 1287 |
| Parties | Dennis E. WHITFIELD, Deputy Secretary of the United States Department of Labor, Plaintiff, v. Anthony TOMASSO, Daniel Cunningham, Theodore Nicolosi, Frank Van Cise, Robert Green, Eugene Brown, Annette Sacino, Louis Fenza, Allied Security Health and Welfare Fund, Allied International Union, Dome Insurance Company, Court Investment Co., Inc., Administrative Systems, Inc., International Financial Services, Ltd., Leo Bloom, Philip Bloom, Kathleen Tomasso, Herman Jaffe, and Salvatore Ponte, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
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Polly A. Dammann, U.S. Dept. of Labor, Office of The Solicitor, Washington, D.C., for plaintiff.
Leopold, Gross, Sommers & Israel, P.C., Brooklyn, N.Y., for defendant Jaffe.
Robert Sparago, Knoxville, Tenn., for defendant Administrative Systems.
Gerald V. Dandeneau, Melville, N.Y., for defendants Brown, Green, Sacino, Fenza, Allied Sec. Health and Welfare Fund and Allied Intern. Union.
George H. Logan, Christiansted, St. Croix, U.S. V.I., for defendant Dome Ins. Co.
J. Kevin Meneilly, Jericho, N.Y., for defendant Van Cise.
Vincent A. Pirrone, Long Beach, N.Y., for defendant Nicolisi.
Arnoff & Merin, New York City, for defendant Cunningham.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This matter consists of three consolidated cases: Whitfield (formerly Brock) v. Tomasso, et al., CV 84-4280; Brown v. Tomasso, et al., CV 84-2634, and Benvenuto v. Schneider, et al., CV 85-1664. The cases were tried before the Court, and the Court hereby makes the following findings of fact and conclusions of law pursuant to Federal Rules of Civil Procedure 52(a) in case number CV 84-4280, Whitfield v. Tomasso.
1. The Allied Security Health and Welfare Fund (the "Fund") is an employee welfare benefit plan sponsored by the Allied International Union ("Allied" or the "Union"), an employee organization representing security guards in the New York City metropolitan area and in Washington, D.C. The Fund has provided medical, dental, optometrical, and prepaid legal benefits for its members, the contributions for which have been wholly borne by employers having collective bargaining agreements with the union. At all times the Fund has shared office space with Allied, and many employees of the Fund were also employees of Allied.
2. In the mid 1970's, Daniel Cunningham controlled the union and in October 1982 Cunningham was sentenced to five years imprisonment for a variety of union and Fund crimes. United States v. Cunningham, CR XX-XXX-XX (J. Glasser, E.D. N.Y.). Cunningham appointed Anthony Tomasso, who served under Cunningham in the Union, to succeed Cunningham as Allied's President, Union Trustee and Fund Manager. Management of the Fund, which had been operating under one Union Trustee, defendant Cunningham and one Employer Trustee, Theodore Nicolosi, was altered by the defendant Tomasso in early 1983 to require two Union Trustees and two Employer Trustees. Tomasso's intention was that the United States Departments of Labor and Justice would conclude that crime-free management was in place.
3. Nicolosi was selected by Cunningham as the Employer Trustee because he was malleable. Nicolosi signed Fund minutes without knowledge of what took place at the meeting, took no interest in and cared little of what was happening to the Fund. He readily followed orders of others, without taking into account the best interests of the Fund.
4. Pursuant to the plan of four trustees, Tomasso instructed Nicolosi to resign and, on or about January 20, 1983, handpicked his secretary in the Union office, defendant Annette Sacino, as the second Union Trustee. Tomasso also hand picked defendants Van Cise and Green as the new Employer Trustees. Tomasso chose Sacino for the same reason that Cunningham had selected Nicolosi, the ability to manipulate and control the actions of the Trustees.
5. Van Cise accepted the position of new Employer Trustee with an understanding that he would be permitted to grossly under report the number of Union members for which dues and contributions were submitted. Thus, Van Cise was able to retain a significant percentage of the dues previously checked off from his employees' payroll and was able to save a significant percentage of the contributions properly owned by his company. Green also agreed to become the new Employer Trustee in consideration of the fact that a significant back contribution owed the Fund by Green's company was greatly reduced. With such illegal consideration Tomasso was assured of the loyalty of Van Cise and Green and he, Tomasso, completely controlled the Fund.
6. At no time did Trustees Nicolosi, Van Cise, Green or Sacino review the Fund trust instruments, and they were unaware of their responsibilities under those documents. Additionally, Brown, although aware of his Trustee status, had no notion of his responsibilities as a fund fiduciary.
7. During the period from November 23, 1982 through July 7, 1983, the Fund purchased six certificates of deposit (CDs) from Dome Insurance Company ("Dome"). Dome was a multi-lines insurance company founded by defendant Leo Bloom in 1979 and incorporated under the laws of the U.S. Virgin Islands with offices in Christiansted.
8. The Fund's purchases of CDs from Dome constituted unsecured loans from the Fund to Dome. The CDs were purchased by the Fund in part to provide Tomasso and defendant Mitchel Goldblatt, the Fund's attorney, among others, with "kickbacks," and Tomasso never expected the Fund to recover any of the principal amount of the loans to Dome.
9. Trustees Tomasso and Nicolosi approved the purchase of the first Dome CD on or about November 23, 1982. The twelve month $120,000 CD bore 14% interest and was due November 23, 1983. This investment of $120,000 represented twenty-five percent of the Fund's available assets.
10. As the quid pro quo for purchasing this CD, on December 14, 1982, defendant Bloom caused another of his companies, International Financial Services, Ltd. ("IFS") to make a mortgage loan of $120,000—that being the money invested by the Fund in the Dome CD—to one Michael Franzese, the person who previously helped arrange for Tomasso to become President of the Union.
11. Trustees Tomasso and Nicolosi did not review the Dome financial reports which were available at the time of the first CD purchase, nor did they consult with anyone qualified to evaluate such an investment. Had the Trustees caused an appropriate investigation into the merits of the proposed transaction, they would have discovered the following:
A. The December 21, 1980 Dome Annual Financial Statement reflects Dome ownership of: a $2,000,000 Barclays CD; a mining company valued at $2,000,000; an "unaffiliated" investment company valued at $360,000; and additional paid-in capital of $1,510,300 (reflecting an election by holders of convertible debentures).
B. The $2,000,000 Barclays CD was security for $2,000,000 liability and was thus completely encumbered; the mining company had been purchased for, and was worth no more than, $59,000; the investment company ("Allied Investment Corp.") was a worthless and dormant company also owned by Bloom and for which no money had been paid; and the holders of the convertible debentures had not paid anything for their corporate obligations. Thus, these Dome holdings were largely worthless and the company assets greatly overstated.
C. The June 30, 1981 Dome Interim Financial Statement reflects the loss of the $2,000,000 Barclays CD, a net decrease in working capital of $2,305,563, the acquisition of an oil company for $2,000,000, and additional paid-in capital of $2,670,300 (an increase of $1,160,000 from the prior statement, reflecting a second election by holders of convertible debentures).
D. The oil company had been purchased for no more than $50,000, and the holders of the convertible debentures had not paid anything for their corporate obligations. Thus, Dome's assets were again greatly overstated. The Trustees did not inquire into these facts and were ignorant of them when the Dome CD was purchased.
12. The Board of Trustees increased from two (Tomasso and Nicolosi) to four (Tomasso and Sacino representing the Union, and Van Cise and Green representing the employers) on or about January 20, 1983. Trustess Tomasso, Sacino, Green and Van Cise approved the purchase of a second Dome CD on or about March 10, 1983. This twelve month $70,000 CD bore 14% interest and was due March 10, 1984. The aggregate Dome investment of $190,000 (for the two CDs) represented approximately thirty-two percent of the Fund's available assets.
13. Trustees Green and Van Cise were unaware at the time of the purchase of the second Dome CD for $70,000 that the Fund had previously purchased a Dome CD for $120,000.
14. A third Dome CD was purchased on March 24, 1983. This twelve month $50,000 CD bore 14% interest and was due March 24, 1984. At this point, the aggregate Dome investment of $240,000 represented approximately forty-one percent of the Fund's available assets.
15. A fourth Dome CD was purchased on April 28, 1983. Trustee Tomasso signed the check, payable to Dome for $50,000, and directed a Fund employee to forge Van Cise's signature to the check. This twelve month $50,000 CD bore 14% interest and was due April 28, 1984. At this point, the aggregate Dome investment of $290,000 represented approximately forty-eight percent of the Fund's available assets.
16. On February 16, 1983 IFS lent Tomasso (and his wife Kathleen) $17,500 for the downpayment on the purchase of a house, and on April 29, 1983 IFS lent Tomasso (and his wife) $160,000 as a mortgage for the house. These funds were given in exchange for the second, third, and fourth Dome CDs. The Trustees...
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