Luzerne County Retirement Board v. Makowski (627 F. Supp. 2d 506, 2007)

MEMORANDUM

A.RICHARD CAPUTO, District Judge.

TABLE OF CONTENTS

BACKGROUND................................................................512

I. Factual History........................................................512

A. Introduction.......................................................512

B. The Luzerne County Retirement Fund ...............................512

C. The Joyce-Williamson Agreement....................................513

D. The Joyce and Williamson Campaign Contributions.....................517

E. The Safeco Investments.............................................517

F. The Provident Annuities.........................................'... 519

G. The Manulife Annuity Contracts.....................................524

H. The FSI Bonds....................................................527

I. The Wells Agreement ..............................................527

J. Rochdale..........................................................528

K. LPL .............................................................528

L. The Fund’s Accountants — Snyder & Clemente.........................529

M. The Fund’s Auditors — Zavada & Associates...........................529

N. The Fund’s Actuaries — The Hay Group...............................530

O. ASCO’s Annual Reports ............................................531

P. The Retirement Office..............................................531

Q. The Annual Meetings...............................................533

R. Alleged Concealment of the Scheme..................................533

S. Urban and Flood Elected; Investigation Commences...................534

T. The Board Terminates ASCO........................................535

1. The September 5, 2002 Board Meeting............................535

2. The September 17, 2002 Board Meeting...........................536

3. The October 1, 2002 Board Meeting...............................537

U. The Board Liquidates the Fund’s Investments.........................538

V. Solicitor Hassey’s Letters...........................................539

W. Schnader, Harrison’s Investigation...................................540

X. The County Sues the Board.........................................541

II. Procedural History.....................................................541

A. The Complaint.....................................................541

B. The Motions to Dismiss the Complaint................................542

C. Counterclaims and Crosselaims......................................542

D. Stipulations of Dismissal............................................543

E. The Motions to Dismiss the Counterclaims and Crossclaims.............543

F. Flood Dropped as a Plaintiff.........................................543

G. The Instant Motions for Summary Judgment..........................543

LEGAL STANDARD............................................................544

DISCUSSION..................................................................545

I.Defendants’ Motions for Summary Judgment — Plaintiffs Federal Claims.....545

A. RICO Claims (Counts III, IV and VI) ................................545

1. RICO — In General .............................................545

2. Conducting/Participating in a RICO Enterprise (Count III)..........545

a. PSLRA...................................................546

i. Are the Annuities “Securities”? ..........................546

ii. Rule 151 Safe Harbor...................................554

iii. Section 3(a)(2).........................................554

iv. Are the Annuities “Investment Contracts”?................555

v. Actionable Securities Fraud.............................556

vi. Conclusion as to PSLRA................................559

b. Scheme to Defraud.........................................559

i. Bribery...............................................560

ii. Failure to Disclose a Conflict of Interest..................563

iii. Conclusion as to Scheme to Defraud......................570

c. Conclusion as to Count III...................................570

3. RICO Conspiracy Claims (Counts IV and VI)......................571

a. Count IV..................................................571

b. Count VI..................................................571

B. Violation of the Investment Advisors Act (Count VII)...................572

1. Introduction...................................................572

2. Legal Standard ................................................572

3. Analysis.......................................................572

II. State Law Claims, Counterclaims and Third-party Claims ...................574

CONCLUSION.................................................................574

Presently before the Court are eleven (11) motions for summary judgment. (Docs. 390, 391, 400, 403, 406, 409, 414, 419, 420, 426, 427.) Defendants Nationwide Life Insurance Company (Doc. 390), Manufacturers Life Insurance Company (U.S.A.) (Doc. 391), Thomas Makowski, Thomas Pizano, Frank Crossin and Joseph Jones (Doc. 414), Joseph J. Joyce Associates, Inc., John Joyce and William Joyce (Doc. 419), Safeco Life Insurance Corporation (Doc. 420), ASCO Financial Group, Inc. and Donald Williamson (Doc. 426), and Joseph Perfilio (Doc. 427), have filed motions for summary judgment as to Plaintiff the Luzerne County Retirement Board’s Complaint (Doc. 1).

Third-party Defendant Michael Morreale has filed a motion for summary judgment as to the third-party complaints filed against him by Makowski, Pizano, Crossin and Jones, as well as by Williamson, ASCO Financial Group, Inc. and Perfilio. (Docs. 400, 406.) Counterclaim Defendant, and former Plaintiff, Stephen Flood has filed a motion for summary judgment as to the counterclaims of Williamson, ASCO Financial Group, Inc. and Perfilio. (Doc. 403.) Plaintiff has also filed a motion for summary judgment as to the counterclaims of Williamson, ASCO Financial Group, Inc. and Perfilio. (Doc. 409.)

For the reasons set forth below, Defendants’ motions will be granted as to Plaintiffs federal claims (Counts III, IV, VI and VII). Summary judgment will be entered in favor of Defendants as to these claims. The Court has jurisdiction over Plaintiffs federal claims pursuant to 28 U.S.C. § 1331. The Court will decline to exercise its supplemental jurisdiction, pursuant to 28 U.S.C. § 1367, over Plaintiffs state law claims (Counts I and VIII), as well as the various state law counterclaims and third-party claims. As such, these claims will be dismissed without prejudice.

BACKGROUND

I. Factual History

A. Introduction

This action focuses on investment contracts entered into by the Luzerne County Retirement Board (the “Board”) and/or its members between 1988 and 2002. The current Board (“Plaintiff’) has alleged that several of its former members engaged in a pay-to-play scheme, awarding contracts to invest or manage retirement fund assets and, in exchange, receiving political contributions to finance their reelection campaigns. The former Board members allegedly involved in the scheme are Thomas Makowski, Thomas Pizano, Frank Crossin and Joseph Jones (collectively, at times, the “former Board members”). (Compl. ¶¶ 2-5, Doc. 1 at 7.)

B. The Luzerne County Retirement Fund

Luzerne County maintains a retirement fund (the “Fund”) to provide its employees with income upon their retirement. See County of Luzerne v. Luzerne County Retirement Board, 882 A.2d 531, 533 (Pa.Commw.Ct.2005). The Fund is a legal entity which was created, and is governed, by the County Pension Law, 16 P.S. § 11651 et seq. See County of Luzerne, 882 A.2d at 534. Employees of Luzerne County make contributions to the Fund through payroll deductions and, upon retirement, qualify to receive payments from the Fund. 16 P.S. § 11657(a), (b); McCarrell v. Cumberland County Employees Retirement Board, 120 Pa.Cmwlth. 94, 547 A.2d 1293, 1294-95 (1988); (Def.’s Ex. 95 at ZAV2095, Doc. 443 at 8.) The Fund is a “defined benefit plan,” which means that retirees are entitled to fixed benefit payments, regardless of the assets available in the Fund to pay those benefits. (See LCRB 14292, Doc. 496-4 at 44; Def.’s Ex. 35 at LCRB 08580, Doc. 439-14 at 4.) To the extent that the benefit payments owed by the Fund to retirees exceed the Fund’s assets, Luzerne County must contribute taxpayer money to make up the difference. (See Def.’s Ex. 35 at LCRB 08580, Doc. 439-14 at 4.)

The Fund is administered by the Board. 16 P.S. § 11654(b). The Board consists of five (5) elected officials of Luzerne County — the three (3) Commissioners, the Controller and the Treasurer. Id.; County of Luzerne, 882 A.2d at 534 n. 2. Board members are trustees of the Fund and serve as its fiduciaries. 16 P.S. § 11659 (“The members of the board shall be trustees of the fund, and shall have exclusive management of the fund with full power to invest the moneys therein subject to the terms, conditions, limitations and restrictions imposed by law upon fiduciaries”).

Meetings of the Board are chaired by the Chairman of the Luzerne County Commissioners. 16 P.S. § 11654(b). Three (3) members of the Board constitute a quorum. Id. The Board is subject to the provisions of the Pennsylvania Open Public Meeting Law, 65 Pa. Cons.Stat. Ann. § 701 et seq, or Sunshine Act. 65 Pa. Cons.Stat. Ann. § 703 (providing that any board of any political subdivision of the Commonwealth is subject to the Sunshine Act).

In March of 1988, the Board’s members were Frank Crossin, Frank Trinisewski, and Jim Phillips, the three (3) Luzerne County Commissioners, Joseph S. Tirpak, the Luzerne County Controller, and Michael Morreale, the Luzerne County Treasurer. (Def.’s Ex. 56 at FLOOD 5459, Doc. 441-6 at 7.)

C. The Joyce-Williamson Agreement

According to Plaintiff, the putative pay-to-play scheme originated in 1987 by means of a “secret, undisclosed handshake deal” between Donald Williamson, John Joyce, and Joseph J. Joyce, Sr., John Joyce’s father, now deceased. (Pl.’s Br. in Opp’n at 10., Doc. 484-1 at 27; see John J. Joyce Dep. 48:18-49:16, Feb. 21, 2006, Doc. 434-15 at 13.)

Donald Williamson, doing business as ASCO Financial Group, Inc. (“ASCO”) (collectively, at times, “Williamson/ASCO”), a Pennsylvania corporation (Answer of ASCO ¶ 6, Doc. 201 at 2), is an insurance broker and investment advisory representative. (Donald Williamson Dep. 35:4-38:22, Aug. 17, 2005, Doc. 435-18 at 10-11.) Donald Williamson is the president and chief executive officer of ASCO. (Answer of ASCO ¶7, Doc. 201 at 3.) Williamson is also a broker/dealer for FSC Securities Corporation (“FSC”). (Williamson Dep. 31:19-24, Doc. 435-18 at 9.) His wife Maria Williamson is the secretary and vice president of ASCO. (Answer of ASCO ¶ 8, Doc. 201 at 3.)

John Joyce is president and part owner, along with his brothers Joseph J. Joyce, Jr. and William Joyce, of Joseph J. Joyce Associates, Inc. (“JJJA”) (collectively, at times, the “Joyces”), a Pennsylvania corporation principally engaged in the sale of insurance products. (Answer of JJJA, John J. Joyce and William J. Joyce ¶ 13, Doc. 205 at 2; see John J. Joyce Dep. 25:25-26:5, Doc. 434-15 at 7-8.) He is also part owner of Joyce, Jackman & Bell Insurers (“JJ & B”), a Pennsylvania partnership and insurance agency. (Id. ¶ 14, Doc. 205 at 2; see John J. Joyce Dep. 9:22-10:2, Doc. 434-15 at 3-4.) Shortly after John Joyce graduated from college in 1977, he went to work for Williamson. (John J. Joyce Dep. 9:13-17, Doc. 434-15 at 3.) John Joyce later became the Secretary of ASCO. (Answer of JJJA, John J. Joyce and William J. Joyce ¶ 16, Doc. 205 at 2.) He also held an ownership interest in ASCO at one time. (Williamson Dep. 105:20-24, Doc. 435-18 at 27.) John Joyce continues to work for ASCO as a broker. (John J. Joyce Dep. 13:7-9, Doc. 434-15 at 5.)

The late Joseph J. Joyce, Sr. founded and managed both JJJA and JJ & B. (John J. Joyce Dep. 9:19-10:2, Doc. 434-15 at 3.) Joseph Joyce, Sr. also held an ownership interest in (Williamson Dep. 105:20-24, Doc. 435-18 at 27) and served as treasurer of ASCO. (Answer of JJJA, John J. Joyce and William J. Joyce ¶ 15, Doc. 205 at 2.) Joseph Joyce, Sr. was very active in politics, at both the local and national levels. (JJJA, John J. Joyce and William J. Joyce’s Mem. of Law at 2, Doc. 425 at 8; see PL’s Br. in Opp’n at 9, Doc. 484-1 at 26.) The Joyces contributed money to the political campaigns of many candidates running for public office, including Makowski, Pizano, Crossin, Jones, Morreale and others. (Id. at 2-3, Doc. 435 at 8-9; see PL’s Br. in Opp’n at 9, Doc. 484-1 at 26.)

Pursuant to the handshake deal, the Joyces would bring accounts to Williamson/ ASCO, and, in exchange, the Joyces would receive fifty percent (50%) of the commissions Williamson/ASCO received from providing financial services to those accounts. (John J. Joyce Dep. 48:18-49:16, Doc. 434-15 at 13.)

In late 1987, Williamson/ASCO wanted to become investment manager for the Fund. (Williamson Dep. 112:12-23, Doc. 435-18 at 29.) Knowing that Joseph Joyce, Sr. was a major political player in northeastern Pennsylvania, Williamson spoke with John Joyce about the possibility of providing financial services to the Fund. (Williamson Dep. 113:6-13, Doc. 435-18 at 29.) John Joyce then asked his father Joseph Joyce, Sr. to see if he could find somebody in the Luzerne County government that Williamson could speak with about working on the Fund. (Williamson Dep. 113:16-24, Doc. 435-18 at 29.) Apparently, Joseph Joyce, Sr. spoke with Crossin, a Luzerne County Commissioner and Board member, because, in January of 1988, Williamson received a phone call from Crossin to set up an appointment to speak about the Fund. (Williamson Dep. 114:1-20, Doc. 435-18 at 30.) According to Williamson, Crossin was dissatisfied with the fact that all of the Fund’s assets were tied up in a single financial institution. (Williamson Dep. 114:5-17, Doc. 435-18 at 30; see Frank Crossin Dep. 14:15-15:6, Aug. 2, 2005, Doc. 434-9 at 5.) In fact, Crossin and other Board members — Tirpak, Morreale and Trinisewski — “had been discussing the multiple manager matrix concept to bring more people into the fund, bring more local people involved, local brokers, local banks and that type thing.” (Crossin Dep. 14:22-15:5, Doc. 434-9 at 5.) At that time, United Penn Bank managed all of the Fund’s sixty million dollars ($60,-000,000) worth of assets. (PL’s Ex. 74 at LCRB 00551-00552, Doc. 454-12 at 3-4.) United Penn Bank’s fees for managing the Fund amounted to approximately fifty-five thousand dollars ($55,000) per year. (Id. at LCRB 00552, Doe. 454-12 at 4.)

Williamson met with Crossin later that January of 1988. (Williamson Dep. 114:5-115:2, Doc. 435-18 at 30.) Williamson explained in general terms his proposal that the Fund would be managed using a multiple manager approach which Williamson/ASCO, would administer and coordinate. (Crossin Dep. 24:13-25:2, Doc. 434-9 at 7.) Williamson then met with Charles Gelso, Solicitor for the Board. (Williamson Dep. 115:15-21, Doc. 435-18 at 30.) Gelso provided Williamson with all the documents and financial reports Williamson needed to prepare a formal proposal to present to the Board. (Williamson Dep. 115:15-117:21, Doc. 435-18 at 30.) Next, Williamson met with Tirpak, who placed Williamson/ASCO on the agenda of the Board’s next meeting. (Williamson Dep. 118:6-118:18, Doc. 435-18 at 31.)

At a March 2, 1988 meeting of the Board, Williamson presented his investment proposal. (PL’s Ex. 74 at LCRB00550, Doc. 454-12 at 2.) Williamson proposed a multiple manager approach to the Fund’s management, a strategy which he asserted would: (1) increase diversification of Fund assets so as to reduce risk to principal; (2) significantly reduce investment management fees; and (3) increase the overall performance of the Fund by (a) utilizing the expertise of various types of financial institutions specializing in a certain class of assets, and (b) creating competition among the Fund’s managers. (Id.) The proposal called for four (4) portfolio investment managers: (1) United Penn Bank; (2) First Eastern Bank; (3) First Valley Bank; and (4) Safeco Life. (Id.) Williamson/ASCO would coordinate the administrative details required to implement the multiple manager system. (Id.)

After Williamson had finished his presentation, the Board discussed whether to accept the multiple manager proposal. (Id.) Morreale objected to an immediate decision by the Board, stating that “other banks were never contacted nor was it ever discussed by the Board as a unit.” (Id.) Morreale “could not see why any hasty decision was required” and “attempted to dissuade the other four members of the Board from making a decision, thus giving more time for consideration to a proposal for multiple management and to allow more than four financial institutions to present proposals.” (Id.) Morreale moved to table Williamson’s proposal but no other Board member seconded his motion. (Id.)

Objections to the Board’s immediate decision also came from United Penn Bank, which did not want to lose control over the entirety of the Fund’s assets, as well as Merchants Bank, Northeastern Bank and the Baltimore Life Insurance Company, which each asked the Board to delay its decision until they had the opportunity to present their own proposals on the subject of multiple fund management. (Id.)

Notwithstanding the objections to the hastiness of such a decision, Tirpak moved to accept the proposal of Williamson/ASCO. (Id.) Phillips seconded Tirpak’s motion. (Id.) A vote was then taken. (Id.) All Board members except for Morreale voted to accept Williamson/ASCO’s proposal. (Id.) Morreale voted against it. (Id.) As such, on March 2, 1988, the very same day it was presented with the multiple fund manager proposal, the Board entered into a Consulting Services Agreement (the “ASCO Agreement”) with Williamson/ASCO, retaining Williamson/ASCO to serve as the Fund’s investment consultant and administrative agent. (Def.’s Ex. 56 at FLOOD 5453-5459, Doc. 441-6 at 1-7.) All Board members, including Morreale, signed the ASCO Agreement. (Id. at FLOOD 5459, Doc. 441-6 at 7.) Relevant provisions of the ASCO Agreement are set forth in the margin. As per their handshake agreement, the Joyces received approximately fifty percent (50%) of the commissions Williamson/ASCO received from work on the Fund. (See Joyce Br. in Supp. at 3, Doc. 425 at 9.)

On June 29, 1989, Williamson/ASCO took standing authority to request disbursements or make withdrawals of the Fund’s assets from Safeco Life Insurance Corporation in order to pay participant benefits. (Pl.’s Ex. 115 at ASCO 001491, Doc. 491-3 at 2.) On January 2, 1992, Williamson/ASCO received authority to request disbursements or withdrawals of the Fund’s assets from Provident Mutual Life Insurance Company in order to pay benefits. (Def.’s Ex. 58 at FLOOD 6066, Doc. 441-8 at 1.) On December 31, 1999, the Board entered into a separate contract with Williamson/ASCO, retaining them to administer the daily operations of the Luzerne County Retirement Office (the “Retirement Office”). (Pl.’s Ex. 123 at LCRB 00590-00593, Doc. 491-3 at 28-31.) In 2001, the Retirement Office was closed and all of its functions were outsourced to ASCO. (Lois Kammerer Dep. 29:5-7, June 17, 2005, Doc. 434-18 at 8.)

D. The Joyce and Williamson Campaign Contributions

Between 1991 and 2002, the Joyces, their companies, and their employees, contributed eighty-two thousand fifty dollars ($82,050) to the reelection campaigns of Makowski, Pizano and Crossin. (See Pl.’s Am. Resp. to JJJA Interrogs. at Ex. A, Doc. 457-6 at 10-12.) Williamson, his wife Maria, as well as agents and employees of ASCO, contributed nineteen thousand seven hundred dollars ($19,700) to the campaigns of Makowski, Pizano, Crossin and Jones. (See Pl.’s Resp. to Williamson Interogs. at Ex. A, Doc. 498-2 at'35.)

Plaintiff contends that, shortly before or after these contributions were made, Makowski, Pizano, Crossin and Jones, as Board members, “unlawfully caused the Retirement Plan to incur contractual obligations that furthered the lucrative deals made by the ASCO and Joyce defendants. Rather than making those contracts at formal meetings of the Board, they did so by signing or acquiescing [to] the contracts in backroom meetings outside of public view.” (Pl.’s Br. in Opp’n at 14, Doc. 484-1 at 31.)

The contractual obligations entered into as part of this alleged pay-to-play scheme include those entered into with: (1) Safeco Life Insurance Corporation; (2) Provident Mutual Life Insurance Company; (3) The Manufacturers Life Insurance Company (U.S.A.); (4) First Security Investments; (5) Wells Real Estate Funds, Inc.; (6) Rochdale Investment Management, Inc.; and (7) Linsco Private Ledger Corp. (See id. at 13-34, Doc. 484-1 at 30-51.)

E. The Safeco Investments

On March 21, 1988, the Board entered into an investment agreement with Safeco Life Insurance Corporation (“Safeco”) to purchase a Qualified Pension Annuity Contract, Series II (“QPA-2”), which would become effective on May 4, 1988. (PL’s Ex. 358 at Safeco 00127-00134, Doc. 456-3 at 1-8.) The QPA-2 was a traditional fixed annuity with a guaranteed rate of return. (Id. at Safeco 00127, Doc. 456-3 at 1; PL’s Ex. 360 at Safeco 00116, Doc. 456-4 at 3.) The initial interest rate was approximately eight percent (8%) (PL’s Ex. 358 at Safeco 00127, Doc. 456-3 at 1), "and Safeco promised that in no event would the Fund’s interest rate be less than seven and one-quarter percent (7.25%) for the first five (5) years of the contract and no less than four and one-quarter percent (4.25%) for all contract years thereafter (PL’s Ex. 360 at Safeco 00116, Doc. 456-4 at 3). All deposits were held in Safeco’s general corporate fund, not a separate account. (See PL’s Ex. 360 at Safeco 00115, Doc. 456-4 at 2.) Thirteen and one-half million dollars ($13,500,000) of the Fund’s assets was deposited into the QPA-2. (Id. at Safeco 00128, Doc. 456-3 at 2.) The QPA-2 agreement was signed by Board members Trinisewski and Tirpak. (Id. at Safeco 00129, 00134, Doc. 456-3 at 3, 8.) Williamson also signed the agreement in his capacity as administrative agent for the Fund. (Id. at Safeco 00130, 00134, Doc. 456-3 at 4, 8.) The QPA-2 provided that Williamson/ASCO would receive a three percent (3%) up-front commission based on the thirteen and one-half million dollar ($13,-500,000) deposit, or four hundred five thousand dollars ($405,000). (Id. at Safeco 00130, Doc. 456-3 at 4.) Williamson split this money equally with John Joyce. (Id. at Safeco 00131, Doc. 456-3 at 5.) The three percent (3%) up-front commission was in addition to the one-fifth of one percent (0.2%), or twenty (20) basis points, that Williamson/ASCO charged as an annual service fee. (Id. at Safeco 00130, Doc. 456-3 at 4.)

In March 1993, a Safeco “Resource Variable Account A” annuity was established using two million dollars ($2,000,000) of the Fund’s assets. (Pl.’s Ex. 361 at ASCO 000158-000163, Doc. 456-5.) Crossin, Tirpak and Morreale signed the agreement. (Id. at ASCO 000160, Doc. 456-5 at 3.) Norm Pickering, of the Hay Group, also signed the agreement. (Id.) The Resource Variable Account A was an “unallocated group variable annuity contract.” (Id. at ASCO 000161, Doc. 456-5 at 4.) No rate of return was promised. Rather, the values provided by the Resource Variable Account A were based on the investment experience of a separate account and were therefore variable and not guaranteed. (Def.’s Ex. 320 at Safeco 00751, Doc. 451-14 at 1.)

The Resource Variable Account A offered annuitants a variety of investment options, including, among others, equity, money market, bond and growth funds. (Id.) These sub-funds were managed by Safeco. (Scott Bartholomaus Dep. 225:5-6, 262:15-19, Mar. 22, 2006, Doc. 434-2 at 6, 15.) Of the two million dollars ($2,000,-000) invested in the Resource Variable Account A, one million dollars ($1,000,000) was invested in an equity sub-fund, five hundred thousand dollars ($500,000) was invested in a growth sub-fund, and five hundred thousand dollars ($500,000) was invested in the Northwest sub-fund. (Def.’s Ex. 321 at Safeco 00746, Doc. 451-15 at 1.) Each of these sub-funds had different objectives, whether it was more conservative or more aggressive and risky. (Bartholomaus Dep. 225:9-14, Doc. 434-2 at 6.)

The Resource Variable Account A, considered by Safeco to be a variable-only annuity, was oftentimes sold in tandem with the QPA-2, considered by Safeco to be a fixed-only annuity. (Bartholomaus Dep. 257:10-22, Doc. 434-2 at 14.) The Resource Variable Account A discloses that Williamson would receive thirty-five percent (35%) of the commission and that JJJA would receive sixty-five percent (65%) of the commission. (Id. at ASCO 000161, Doc. 456-5 at 4.)

On December 27, 1993, Fund assets were used to purchase a “Safeflex Allocated Group Variable Annuity” from Safeco. (Pl.’s Ex. 623 at Safeco 00752-00753, Doc. 494-4 at 9-10; PL’s Ex. 624 at Safeco 00754-00755, Doc. 494-4 at 6-7.) Crossin, Tirpak and Morreale signed the Safeflex annuity contract. (PL’s Ex. 624 at Safeco 00755, Doc. 494^4 at 7.) The Safeflex annuity contract combined fixed and variable offerings into one annuity contract — a separate variable account with fixed annuity riders. (Bartholomaus Dep. 263:12-22, Doc. 434-2 at 16; PL’s Ex. 629 at Safeco 00765-00774, Doc. 494-4 at 24-33; PL’s Br. In Opp’n at 103, Doc. 484-1 at 120 (citing Safeco Statement of Material Facts ¶ 41, Doc. 422 at 8).) It appears that the Fund’s assets were placed in an international fund portfolio managed by Scudder/Stevens & Clark. (PL’s Ex. 623 at Safeco 00752, Doc. 494-4 at 9; see Bartholomaus Dep. 262:22-263:7, Doc. 434-2 at 15-16.) The Safeflex annuity contract discloses that Williamson and Joseph J. Joyce were agents for Safeco and would split the commission equally.

Plaintiff argues that these contracts were “signed by individual Board members in back-room meetings with Williamson, after at least one of those signatories to those contracts received campaign contributions from Safeco.” (PL’s Br. in Opp’n at 20, Doc. 484-1 at 37.) Williamson/ASCO and JJJA split the commissions received from the sale of these Safeco annuities. (See PL’s Ex. 361 at ASCO 000161, Doc. 456-5 at 4; PL’s Ex. 623 at Safeco 00752, Doc. 494-4 at 9.)

F. The Provident Annuities

On October 3, 1991, Williamson/ASCO entered into á “Special Agent’s Agreement” with Provident Mutual Life Insurance Company (“Provident”), thus enabling them to sell Provident’s insurance products and annuities. (PL’s Ex. 550 at NAT 00899-00904, Doc. 494-3 at 24-29.) Shortly thereafter, on February 18, 1992, John Joyce entered into a “Special Agent’s Agreement” with Provident to sell the same insurance products and annuities. (PL’s Ex. 21 at NAT 00915-00919, Doc. 487-2 at 1-5.)

On December 18, 1991, at a duly convened public meeting, the Board adopted and signed a resolution “to further diversify the asset management and expand the performance of the retirement fund.” (PL’s Ex. 30 at NAT 01185, Doc. 454-3.) To that end, the Board appointed Provident as an additional “Pension Fund Investment Portfolio manager.” (Id.) All five (5) Board members — Crossin, Trinisewski, Phillips, Tirpak and Morreale— voted in favor of the resolution. (Def.’s Ex. 24 at LCRB 00561, Doc. 439-5 at 4.) All five (5) Board members signed the resolution. (Id.) Six million dollars ($6,000,000) was transferred to Provident to purchase a group annuity contract (the “First Provident Annuity”). (PL’s Ex. 30 at NAT 01185, Doc. 454-3; PL’s Ex. 29 at ASCO 001478-001479, Doc. 487-2 at 12-13.) The First Provident Annuity offered eight (8) different sub-funds into which Fund assets could be placed. (Id.) Only one, the “Guaranteed Investment Certificates,” offered a guaranteed rate of return. (Id.; see Pl.’s Ex. 91 at NAT 00002, Doc. 454-17 at 1.) The Fund’s money was invested in three sub-funds — a value equity fund, a bond fund and an aggressive equity fund. (PL’s Ex. 29 at ASCO 001478-001479, Doc. 487-2 at 12-13.) Under the terms of the First Provident Annuity, these sub-funds were separate accounts, segregated from all other assets of Provident. (PL’s Ex. 91 at NAT 00018, 00022, Doc. 454-17 at 16, 20.) The assets placed in the sub-funds were managed by Provident. (Id. at NAT 00023, Doc. 454-17 at 21 (“The investment and reinvestment of such assets will be made by [Provident] in its discretion based solely upon [Provident’s] determination of market conditions at the time such investment or reinvestment is made.”).) The First Provident Annuity provided that the value of the Fund’s sub-fund investments could increase or decrease with investment experience and were not guaranteed as to fixed-dollar amounts. (Id. at NAT 00002, Doc. 454-17 at 1.)

Only Crossin signed the First Provident Annuity. (PL’s Ex. 29 at ASCO 001479, Doc. 487-2 at 13.) Williamson and John Joyce, as agents for Provident, derived hundreds of thousands of dollars in commissions as a result of the First Provident Annuity. (Nationwide Statement of Material Facts ¶ 37, Doc. 398; see PL’s Ex. 32 at NAT 01160-01167, Doc. 487-2 at 15-22.)

In January 1993, an additional five million dollars ($5,000,000) was invested in the First Provident Annuity. (Pl.’s Ex. 568 at ASCO 001461-001463, Doc. 456-20 at 2-4.) All five (5) Board members — Crossin, Tucker, Phillips, Tirpak and Morreale signed a letter authorizing this additional investment of the Fund’s money in the First Provident Annuity. (Id. at ASCO 001462, Doc. 456-20 at 3.) This money was placed in the aggressive equity fund and the fixed income fund. (Id. at ASCO 001463, Doc. 456-20 at 4.) The fixed income fund was unlike the other sub-funds, as money invested therein was held in Provident’s general account. (Pl.’s Ex. 91 at NAT 00014, Doc. 454-17 at 13.) The fixed income fund promised a guaranteed interest rate that was set by Provident at the beginning of each calendar year. (Id.)

Beginning in 1994 and continuing until 2002, Williamson and William Joyce solicited political contributions for Makowski, Crossin, Pizano and Morreale from Jeffrey Hugo, a Provident employee. (Jeffrey Hugo Dep. 116:16-122:14, Nov. 16, 2005, Doc. 434-14 at 30-32; see PL’s Ex. 598 at NAT 002107-002100, Doc. 456-21 at 1-4.) Hugo testified that, for example, Williamson and William Joyce would call him and invite him to events held to raise money for these then Board members’ reelection campaigns. (Hugo Dep. 118:4-10, Doc. 434-14 at 31.) Between August 16, 1994 and August 11, 2002, Hugo contributed approximately two thousand nine hundred dollars ($2,900) to the Crossin, Makowski, Pizano and Morreale to finance their campaigns. (See Nationwide Resp. to PL’s Interrogs. at 3, Doc. 498-2 at 21; PL’s Ex. 37 at MPCJ 01221, Doc. 487-4 at 13; PL’s Ex. 41 at MPCJ 00477, Doc. 487-4 at 34; PL’s Ex. 48 at LCRB 032417, Doc. 488-3 at 8.) Plaintiff submits that these political contributions on the part of a Provident employee were the impetus for the former Board members, specifically Makowski, Crossin and Pizano, to purchase three more Provident annuities for the Fund. (PL’s Br. in Opp’n at 24, Doc. 484-1 at 41.)

On August 31, 1995, Crossin and Tirpak, on behalf of the Board, entered into a second group annuity contract with Provident (the “Second Provident Annuity”). (PL’s Ex. 182 at ASCO 001444-001450, Doc. 455-13 at 1-7.) The Second Provident Annuity was purchased for four million dollars ($4,000,000). (Id. at ASCO 001449, Doc. 455-13 at 6.) This money was placed in the United States Government bond fund, the balanced fund, the diversified equity and international equity funds. (Id.) As with the First Provident Annuity, these sub-funds were separate accounts segregated from all other assets of Provident. (See Pl.’s Ex. 34 at NAT 001251, Doc. 454-5 at 42.) Also as with the First Provident Annuity, the values of these separate accounts could increase or decrease with investment experience and were not guaranteed as to fixed-dollar amounts. (Id. at NAT 001210, Doc. 454-5 at 1.)

Hugo is listed on the Second Provident Annuity as the “Pension / Service Representative.” (Id. at ASCO 001448, Doc. 455-13 at 5.) Williamson and Joseph Joyce, Sr. are listed as agents on the form. (Id.) It appears that they split the commission on the Second Provident Annuity. (Id.)

On August 20, 1999, Crossin, Makowski and Jones entered into a third group annuity contract with Provident (the “Third Provident Annuity”), committing approximately thirty-seven million dollars ($37,-000,000) of the Fund’s assets to Provident and consolidating the First and Second Provident Annuities. (Pl.’s Ex. 258 at NAT 001193, 001291-001325, Doc. 455-16 at 1-36.) As of November 29, 2002, this money was placed in the following funds: the United States Government bond fund, the fixed income fund, the diversified bond fund, the growth fund, the diversified equity fund, the small cap value fund, and the small cap growth fund. (Pl.’s Ex. 560 at NAT 00979, Doc. 494-3 at 16.) The fixed income fund was held as part of Provident’s general account. (Pl.’s Ex. 258 at NAT 01303, Doc. 455-16 .at 13.) The fixed income fund was an interest bearing investment that promised a guaranteed rate of return and thus was not subject to market volatility or fluctuations associated with stock or bond funds. (IcL; see PL’s Ex. 560 at NAT 00980, Doc. 494-3 at 17.) The other sub-funds were separate accounts segregated from all other assets of Provident. (Id. at NAT 01307, Doc. 455-16 at 17.) As with the First and Second Provident Annuities, the values of the separate accounts could increase or decrease with investment experience and were not guaranteed. (Id. at NAT 01291, Doc. 455-16 at 1.) For each separate account, Provident would determine how to invest the assets contained therein. (Id. at NAT 01307, Doc. 455-16 at 17.)

ASCO and JJJA are listed as the brokers for the Third Provident Annuity and received commissions as a result of the Board purchasing it. (JJJA, John J. Joyce and William J. Joyce’s Mem. of Law at 2, Doc. 425 at 8; see also PL’s Ex. 38 at Urban 00732, Doc. 454-6 at 1.)

On June 6, 2000, Makowski and Pizano, on behalf of the Board, purchased ■& fourth group annuity from Provident (the “Fourth Provident Annuity”). (PL’s Ex. 259 at NAT 001194, 001326-1369, Doc. 455-17 at 1-45; PL’s Ex. 189 at ASCO 035128-035131, Doc. 491-3 at 64-67.) The Fourth Provident Annuity committed approximately twenty-three million additional dollars ($23,000,000) of Fund assets. (PL’s Ex. 94 at NAT 01177, Doc. 488-4 at 63.) As of November 29, 2002, the approximately twenty-three million dollars ($23,-000,000) was invested in the following sub-funds: the United States Government bond fund, the fixed income fund, the value equity fund, and a deposit account. (PL’s Ex. 560 at NAT 00980, Doc. 494-3 at 17.) The deposit account was an interest-bearing account that was part of Provident’s general corporate account. (PL’s Ex. 259 at NAT 01337, Doc. 455-17 at 12.) The principal of the deposit account plus the interest credited to such account were guaranteed by Provident. (Id.) The fixed income fund, as well as the other sub-fund separate accounts, were the same as was described with regard to the other Provident annuities.

The Fourth Provident Annuity was not approved at a public meeting by a majority of the Board. In fact, Urban, a Board member at the time, did not even know that the Fourth Provident Annuity had been purchased. (Stephen Urban Dep. 14:18-15:21, June 10, 2005, Doc. 435-16 at 5.) ASCO and JJJA were the licensed representatives on the Fourth Provident Annuity and received commissions as a result of the Board purchasing it. {See Pl.’s Ex. 259 at NAT 001194, Doc. 455-17 at 45.)

Makowski and Pizano received political contributions, in the two hundred fifty dollar ($250) to five hundred dollar ($500) range, from William Joyce, Jeffrey Hugo, John Joyce, Joseph Joyce, Jr., Joseph Perfilio and Donald Williamson in the year prior to purchasing the Fourth Provident Annuity. (Pl.’s Ex. 44 at MPCJ 00814, 00817, 00827, 00829, 00833, Doc. 487-4 at 54-62.) All of these campaign contributions were disclosed in campaign finance reports filed with Luzerne County and the Commonwealth of Pennsylvania’s Bureau of Commissions, Elections and Legislation. {See id. at MPCJ 00807, Doc. 487-4 at 54.)

Over the life of the four (4) Provident annuities, John Joyce and JJJA were paid approximately one million six hundred ninety-eight thousand four hundred dollars ($1,698,400) in commissions. (Pl.’s Ex. 32 at NAT 001160-01167, Doc. 487-2 at 15-22; Pl.’s Ex. 92 at NAT 01168-01172, Doc. 488-4 at 54-58; PL’s Ex. 93 at NAT 01173-01176, Doc. 488-4 at 59-62; PL’s Ex. 94 at NAT 01177-01179, Doc. 488^ at 63-65.) Williamson and ASCO were paid approximately two million one hundred forty-nine thousand three hundred dollars ($2,149,300) in commissions. (PL’s Ex. 32 at NAT 001160-01167, Doc. 487-2 at 15-22; PL’s Ex. 92 at NAT 01168-01172, Doc. 488-4 at 54-58; PL’s Ex. 93 at NAT 01173-01176, Doc. 488-4 at 59-62; PL’s Ex. 94 at NAT 01177-01179, Doc. 488-4 at 63-65.)

Plaintiff contends that the four (4) Provident annuities imposed extremely high contract charges on the Fund. (PL’s Br. in Opp’n at 25, Doc. 484-1 at 42.) Moreover, the contract charges were not the only fees imposed by Provident. {Id.) Rather, “[f]or those parts of the [Fundj’s assets that were invested in the Provident contracts’ equity options, the investment manager appointed by Provident to handle the [Fundj’s assets in those accounts charged management fees.” {Id. (citing PL’s Ex. 91 at NAT 00022, Doc. 488-4 at 37).) In addition, the Provident annuities all provided that, in the event of early, non-benefit withdrawals, significant expense recovery charges would be imposed. {Id.)

G. The Manulife Annuity Contracts

On October 5, 1994, Crossin and Tirpak, on behalf of the Board, entered into an “Ultraflex Group Annuity Contract” with Manufacturers Life Insurance Company (U.S.A.) (“Manulife”) (the “First Manulife Annuity Contract”). (PL’s Ex. 45 at Manulife 00891-00892, Doc. 488-2 at 1-2.) Morreale signed the First Manulife Annuity Contract as a witness to the agreement. {Id. at Manulife 00892, Doc. 488-2 at 2.) Williamson also signed the agreement as the Fund’s “pension consultant.” {Id.) The First Manulife Annuity Contract authorized Manulife to accept written financial and administrative direction from Tirpak and Williamson. (Id.) Five million dollars ($5,000,000) of the Fund’s assets would be deposited with Manulife. (Id. at Manulife 00891, Doc. 488-2 at 1.) In addition to the five million dollar ($5,000,000) initial deposit, four hundred thousand dollars ($400,000) would be invested in yearly recurring deposits. (Id. at Manulife 00892, Doc. 488-2 at 2.) Five million dollars ($5,000,000) was wire transferred to Manulife in December of 1994. (See Pl.’s Ex. 466 at Manulife 00594, Doc. 494-3 at 7.)

The First Manulife Annuity Contract was an unallocated non-participating group annuity contract. (Pl.’s Ex. 45 at Manulife 00895, Doc. 488-2 at 5.) Initially, half of the Fund’s money was placed in a five (5) year guaranteed fund which promised a guaranteed compound interest rate. (Pl.’s Ex. 466 at Manulife 00594, Doc. 494-3 at 7.) The other two million five hundred thousand dollars ($2,500,000) was split equally among five (5) pooled funds which did not guarantee a rate of return. (Id.; see PL’s Ex. 45 at Manulife 00891, Doc. 488-2 at 1.) These pooled funds included a high-quality bond fund, an income fund, a growth opportunities fund, a diversified capital fund and a high-yield fund. (PL’s Ex. 45 at Manulife 00891, Doc. 488-2 at 1.) The Fund’s assets which were placed in the guaranteed fund were held by Manulife with its general funds. (Id. at Manulife 00913, Doc. 488-2 at 23.) The pooled funds were separate accounts and the Fund’s assets which were placed in the pooled funds were segregated from Manulife’s other assets. (Id. at Manulife 00916, Doc. 488-2 at 26.) The value of the investments in Manulife’s pooled funds could increase or decrease to reflect the investment experience of that particular fund. (Id. at Manulife 00893, Doc. 488-2 at 3.) Manulife did not guarantee these values. (Id.)

Williamson and Joseph Joyce, Sr. served as insurance brokers for Manulife and derived commissions from the sale of the First Manulife Annuity Contract. (PL’s Ex. 47 at Manulife 00954-00956, Doc. 488-3 at 1-3.) Gary Housman, a Manulife employee, served as the sales representative. (PL’s Ex. 459 at Manulife 00957, Doc. 494-2 at 24.)

On July 19, 1995, Housman contributed two hundred dollars ($200) to the Committee to Elect Crossin/Makowski. (PL’s Ex. 37 at MPCJ 01220, Doc. 487-4 at 12.) On May 17, 1999, Housman contributed five hundred dollars ($500) to the Committee to Elect Makowski and Pizano. (PL’s Ex. 40 at MPCJ 00620, Doc. 487-4 at 29.) On August 16, 1999, Housman contributed another two hundred dollars ($200) to the Committee to Elect Makowski and Pizano. (PL’s Ex. 41 at MPCJ 00497, Doc. 487-4 at 40.) All of these contributions were disclosed in campaign finance reports.

Plaintiff contends that these contributions were made in order to secure Manulife’s position as a Fund money manager, as well as to receive additional Fund assets to invest and manage. (PL’s Br. in Opp’n at 29, Doc. 484-1 at 46.)

On May 19, 1995, two (2) months before Housman made his first political contribution, one million dollars ($1,000,000) of Fund assets, six hundred thousand dollars ($600,000) more than the four hundred thousand dollar ($400,000) yearly recurring deposits called for by the First Manulife Annuity Contract, was deposited with Manulife. (Pl.’s Ex. 469 at Manulife 00585-00587, Doc. 494-3 at 3-5.) Tirpak, not Crossin or Makowski, signed the remittance notice. (Id. at Manulife 00586, Doc. 494-3 at 4.)

On October 2, 1995, five (5) months after Housman’s first campaign contribution, an additional three million dollars ($3,000,000) was wire transferred to Manulife as a result of the Board terminating and liquidating the QPA-2 annuity held with Safeco. (Pl.’s Ex. 374 at Safeco 00012, Doc. 493-4 at 3.) This money was also placed in the First Manulife Annuity Contract. (Id.) Tirpak and Crossin signed the remittance notice. (PL’s Ex. 471 at Manulife 00580, Doc. 494-3 at 2.)

As of December 31, 1998, twelve million three hundred sixty-eight thousand seven hundred fifty-one dollars ($12,368,751) was invested in the First Manulife Annuity Contract. (Manulife 01133, Doc. 497-2 at 53.) Three million seven hundred eleven thousand eighty-five dollars ($3,711,085) was invested in a five (5) year compound interest bearing guaranteed account. (Id.) Eight million six hundred fifty-seven thousand six hundred sixty-five dollars ($8,657,-665) was invested in non-guaranteed, separate, pooled funds. (Id.)

On July 26, 2000, eleven million eight hundred ten thousand nine hundred and two dollars ($11,810,902) was withdrawn from the First Manulife Annuity and transferred to the Fourth Provident Annuity. (PL’s Ex. 485 at Manulife 00434, Doc. 494-3 at 9; Manulife 00449-00451, Doc. 497-2 at 28-30.) This effectively liquidated all of the separate accounts held by the Fund. (Manulife 00449, Doc. 497-2 at 28.) On October 5, 2001, the First Manulife Annuity was terminated when four million two hundred fifty-nine thousand six hundred forty dollars ($4,259,640) was withdrawn from a five (5) year compound interest bearing guaranteed account. (See Manulife 00973, Doc. 497-2 at 34; PL’s Br. in Opp’n at 102 n. 27.)

On March 10, 1999, Crossin and Makowski, on behalf of the Board, entered into an “Ultraflex Plus Group Annuity Contract” with Manulife (the “Second Manulife Annuity Contract”). (PL’s Ex. 49 at Manulife 00001-00002, Doc. 488-3 at 12-13.) This annuity contract gave Manulife thirteen million dollars ($13,000,000) of the Fund’s assets to invest and manage, as well as annual, recurring deposits of five hundred thousand dollars ($500,000). (Id. at Manulife 00001, Doc. 488-3 at 12.) Williamson signed the Second Manulife Annuity Contract as a witness to the agreement, as well as in his capacity as the Board’s pension consultant. (Id. at Manulife 00002, Doc. 488-3 at 13.)

As of October 28, 2002, the Second Manulife Annuity Contract was valued at nine million two hundred fifty thousand three hundred twenty dollars ($9,250,320). (Pl.’s Ex. 530 at Manulife 00054, Doc. 494-3 at 34.) All of this money was placed in Manulife’s non-guaranteed pooled funds held in separate accounts. (Id.)

Throughout the course of the two Manulife annuity contracts, ASCO was paid commissions totaling approximately one million one hundred ninety thousand three hundred dollars ($1,190,300). (PL’s Ex. 101 at Manulife 00978-00979, 01041-01042, 01125-01126, 01180-01181, 01228-01229, 01282-01283, 01321-1322, Doc. 488-4 at 69-82; PL’s Ex. 102 at Manulife 00156-00157, 00224-00226, 00263-00264, 00299-300, Doc. 488-4 at 83-91.) JJJA received approximately five hundred ninety thousand two hundred dollars ($590,200) in commission. (PL’s Ex. 101 at Manulife 00978-00979, 01041-01042, 01125-01126, 01180-01181, 01228-01229, 01282-01283, 01321-1322, Doc. 488-4 at 69-82.)

H. The FSI Bonds

In August 1994, Williamson invested Fund assets with First Security Investments, Inc. (“FSI”). (FSI 00001-00005, Doc. 495-4 at 21-25.) It appears that the Fund’s assets invested with FSI were used to purchase secured bonds offered in a private placement in February 1995. (See FSI 00006, Doc. 495-4 at 26.) Tirpak and Crossin signed documents connected with this investment. (See, e.g., FSI 00004, Doc. 495^1 at 24.) In March 1995, Stephen Alinikoff, a stockbroker for FSI, made a one thousand dollar ($1,000) contribution to the Committee to Elect Crossin/Makowski. (LCRB 032542, Doc. 496-5 at 32.)

I. The Wells Agreement

In early 1999, at Williamson’s recommendation, ten million dollars ($10,000,000) of Fund assets, in deposits of one million dollars ($1,000,000) and nine million dollars ($9,000,000), were invested with Wells Real Estate Funds, Inc. (“Wells”), a real estate investment trust (the “Wells Agreement”). (PL’s Ex. 25 at LCRB 00012-00014, Doc. 487-2 at 6-8; PL’s Ex. 26 at LCRB 00015-00017, Doc. 487-2 at 9-11; Williamson Dep. 439:16, Doc. 435-19 at 45; Crossin Dep. 277:10-288:25, Doc. 434-10 at 13-15.) The Wells Agreement was signed by Makowski and Crossin. (Pl.’s Ex. 25 at LCRB 00013, Doc. 487-2 at 7; PL’s Ex. 26 at LCRB 00016, Doc. 487-2 at 10.) Makowski, Crossin and Jones signed the form acknowledging receipt of the prospectus. (PL’s Ex. 25 at LCRB 00014, Doc. 487-2 at 8; PL’s Ex. 26 at LCRB 00017, Doc. 487-2 at 11.) FSC served as broker/dealer for both deposits. (PL’s Ex. 25 at LCRB 00013, Doc. 487-2 at 7; PL’s Ex. 26 at LCRB 00016, Doc. 487-2 at 10.) As FSC representatives, Michael Joyce and Perfilio shared a seven percent (7%) commission, or seventy thousand dollars ($70,000) on the first one million dollar ($1,000,000) deposit. (PL’s Ex. 25 at LCRB 00013, Doc. 487-2 at 7.) Williamson, also an FSC representative, received the commission on the second nine million dollar ($9,000,000) deposit. (PL’s Ex. 26 at LCRB 00016, Doc. 487-2 at 10; Williamson Dep. 332:7-333:14, Doc. 435-19 at 18.)

J. Rochdale

On March 10, 1999, Makowski, Crossin and Jones, on behalf of the Board, entered into a portfolio monitoring agreement with FSC, appointing Rochdale Investment Management, Inc. (“Rochdale”) as third party investment manager and investing one million one hundred thousand dollars ($1,100,000). (ASCO 035831-035835, Doc. 495-3 at 1-5.) As an FSC representative, Williamson collected commission on this investment. (ASCO 035831, Doc. 495-3 at 1; see Williamson Dep. 327:18-332:21, Doc. 435-19 at 17-18.)

K. LPL

On July 27, 1999, Michael Hirthler, a registered representative of Linsco Private Ledger Corp. (“LPL”) made a two hundred fifty dollar ($250) campaign contribution to the Committee to Elect Makowski and Pizano. (PL’s Ex. 41 at MPCJ 00484, Doc. 487-4 at 38.) Less than one (1) month later, on August 20, 1999, Crossin, Makowski and Jones invested one million five hundred thousand dollars ($1,500,000) of the Fund’s money with LPL. (PL’s Ex. 85 at LCRB 00059-00060, Doc. 488-4 at 16-17.) Six (6) weeks later, on October 4, 1999, Hirthler made a second campaign contribution to the Committee to Elect Makowski and Pizano, this time in the amount of one thousand five hundred dollars ($1,500). (Pl.’s Ex. 41 at MPCJ 00542, Doc. 487-4 at 48.)

L. The Fund’s Accountants — Snyder & Clemente

Snyder & Clemente performed accounting services for the. Fund from the mid-1980s until 2002. (Martin Flaherty Dep. 14:22-15:3; 102:11-13, June 27, 2005, Doc. 434-12 at 5, 27.) Each year Snyder & Clemente prepared what is called a “compilation” so that the Fund’s actuary, the Hay Group, could prepare an actuarial valuation of the Fund. (Flaherty Dep. 14:1-5, Doc. 434-12 at 5.) “A compilation is receiving information from management, basically reading it over and putting it in the form of financial statements .... ” (Raymond G. Zavada Dep. 15:21-16:1, June 15, 2005, Doc. 435-22 at 5; see Flaherty Dep. 16:23-6, Doc. 434-12 at 5 (“The compilation is basically compiling statements from the books and records of the plan.... We merely gather information”).) Snyder & Clemente compiled these financial statements from information received from ASCO and, sometimes, the investment managers themselves. (Flaherty Dep. 17:7-20, Doc. 434-12 at 5.) Specifically, Snyder & Clemente would start with an investment manager’s account statement, look at the transactions that occurred during the year, and then follow the money from one bank statement to another. (Flaherty Dep. 58:18-59:21, Doc. 434-12 at 16.)

Snyder & Clemente was able to obtain all of the documentation needed to prepare the compilation. (Flaherty Dep. 18:8-10, Doc. 434-12 at 6.) Neither ASCO nor any investment manager gave Snyder & Clemente any problems when asked to turn over documents. (Flaherty Dep. 22:19-21, Doc. 434-12 at 7.) In preparing the compilations, Snyder & Clemente created spreadsheets disclosing the investment managers and the investment management fees charged to the Fund by each manager. (Flaherty Dep. 93:1-24, Doc. 434-12 at 24; Raymond G. Zavada Dep. 72:24-73:15, June 15, 2005, Doc. 435-22 at 19; see, e.g., Def.’s Ex. 129 at SC 001745, Doc. 444-8 at 1.) These spreadsheets were available to Board members. (Flaherty Dep. 56:1-11, Doc. 434-12 at 15.)

M. The Fund’s Auditors — Zavada & Associates

Zavada & Associates has been the Fund’s auditor since the 1980s. (Zavada Dep. 14:2-9, Doc. 435-22 at 5.) “An audit is a verification process whereby an independent party, an accounting firm, reviews backup documentation, policies and procedures, and renders an opinion that the financial statements are fairly presented in accordance with generally accepted accounting principles.” (Zavada Dep. 15:7-15, Doc. 435-22 at 6.) “An audit includes examining on a test basis evidence supporting the amounts and disclosures on the financial statements.” (Zavada Dep. 113:8-14, Doc. 435-22 at 29.)

The audit was performed after both Snyder & Clemente performed the compilation and the Hay Group issued its actuarial report. (See Zavada Dep. 50:7-12, Doc. 435-22 at 14.) Indeed, the starting point for Zavada & Associates was Snyder & Clemente’s compilation. (Zavada Dep. 46:9-18, Doc. 435-22 at 13.) Zavada & Associates also received a copy of the Hay Group’s actuarial report. (Zavada Dep. 47:22-48:3, Doc. 435-22 at 13.) Both were necessary items to completing the audit. (Zavada Dep. 56:6-9, Doc. 435-22 at 15.)

After receiving the compilation and actuarial report, Zavada & Associates would then send requests to various investment managers to confirm much of the information. (Zavada Dep. 46:15-18, Doc. 435-22 at 13.) Importantly, the spreadsheets prepared by Snyder & Clemente, those disclosing the investment managers and the investment management fees charged to the Fund by each manager, were confirmed by Zavada & Associates. (Zavada Dep. 74:6-9, Doc. 435-22 at 20.)

Zavada & Associates also received information and account statements from ASCO, and, prior to ASCO taking over as administrative agent for the Fund, from Plaintiff. (Zavada Dep. 57:3-58:18, Doc. 435-22 at 15-16.) Specifically, Zavada & Associates received from ASCO “[information on investments. Pretty much any, any investment that they managed, there would be all the monthly statements and all the detail on the transactions in those accounts that were maintained at ASCO.” (Zavada Dep. 58:12-18, Doc. 435-22 at 16.)

Also, every year Zavada & Associates would receive a statement of account from Provident related to the annuities held by the Fund. (Zavada Dep. 65:24-66:8, Doc. 435-22 at 18; see Def.’s Ex. 133 at ZAV0550-0573, Doc. 444-12 at 1-23; see also Def.’s Ex. 138 at ZAY1305, Doc. 444-17 at 1; Def.’s Ex. 139 at ZAV1273, Doc. 444-8 at 1.) These statements of account displayed the commissions and fees related to the Provident annuities, as well as the fact that JJJA was receiving a portion of them. (See, e.g., Def.’s Ex. 133 at ZAV 0550, Doc. 444-12 at 1.) These statements of account also disclosed the administrative fees charged to the Fund. (See id.)

Zavada & Associates’ audit reports included, among other things, charts displaying the Fund’s expenses by type. (See, e.g., Def.’s Ex. 128 at ZAV 5448, Doc. 444-7 at 13.) These charts covered the Fund’s expenses for the previous ten (10) year period. (See id.) One of the columns of expenses is entitled “Administrative/Miscellaneous.” (See id.) The audit reports also contain charts displaying the additions and deductions from the Fund’s assets for the year. (See id. at ZAV 5449, Doc. 444-7 at 14.) One of the rows in the addition part of the chart is entitled “Less investment expense.” (See id.) A row listing deductions is entitled “Administrative expense.” (See id.)

N. The Fund’s Actuaries — The Hay Group

The Hay Group has performed actuarial services for the Fund since the late 1970s. (Norman Pickering Dep. 37:3-12, Sept. 14, 2005, Doc. 435-6 at 10.) In fact, the Hay Group performed actuarial valuations for sixty (60) of the sixty-seven (67) counties in Pennsylvania. (Pickering Dep. 92:21-93:3, Doc. 435-6 at 24.) Specific to the Fund, the Hay Group prepared a report on the financial actuarial position of the Fund— that is, essentially, answering the question of whether the Fund will have enough assets to pay out retirement and other benefits to Fund members in the future. If a shortfall is predicted, Luzerne County must contribute taxpayer money to make up the difference. (Pickering Dep. 68:2-7, Doc. 435-6 at 18; see Def.’s Ex. 35 at LCRB 08580, Doc. 439-14 at 4.) For the years 1987 through 2001, Luzerne County was not required to make any monetary contribution to the Fund. (Def.’s Ex. 94 at LCRB 07516, Doc. 442-24 at 9; Def.’s Ex. 91 at ZAY3409, Doc. 442-21 at 23; Pickering Dep. 68:2-69:4, Doc. 435-6 at 18.)

Most of the financial information the Hay Group used to prepare the actuarial report was provided by Plaintiff itself, its secretary and/or controller. (Pickering Dep. 46:11-47:10, Doc. 435-6 at 13.) Snyder & Clemente also supplied the Hay Group with financial statements needed to prepare the actuarial report. (Pickering Dep. 46:19-17:8, Doc. 435-6 at 13.)

The actuarial reports prepared by the Hay Group disclosed, among other things, the total amount charged to the Fund for administrative and investment management expenses. (See, e.g., Def.’s Ex. 91 at ZAV 3391, Doc. 442-21 at 6.) The actuarial reports also contained charts explaining how the Fund’s assets were allocated among different types of investments— cash, stocks, bonds, real estate, etc. (See, e.g., Def.’s Ex. 92 at Urban 01158, Doe. 442-22 at 7.)

O. ASCO’s Annual Reports

Each year, from 1989 through 2002, ASCO prepared a financial report concerning the Fund for Plaintiff. (Michael Morreale Dep. 152:6-0, June 14, 2005, Doc. 435 at 39; Flood Dep. 266:6-14, Doc. 434-13 at 68.) Financial reports for the years 1989 through 1992, 1994 through 1996, and 1999 through 2002 are included in the summary judgment record.

ASCO’s reports appear to be fairly comprehensive, sometimes including copies of Snyder & Clemente’s compilation and the Hay Group’s actuarial valuation. (See Pl.’s Ex. 110 at LCRB 00874-00928, Doc. 491-2 at 1-55.) Relevant to the instant motions is the fact that ASCO’s reports disclosed each of the Fund’s investment managers, the amount and style of the investments, as well as the total amount of administrative and investment management expenses charged to the Fund by the investment managers. (See, e.g., PL’s Ex. 110 at LCRB 00879, 00889-00890, Doc. 491-2 at 6, 16-17.) ASCO’s reports also disclosed the return experienced by the Fund, including returns from prior years, and sometimes the returns delivered by each particular investment manager. (See, e.g., PL’s Ex. 108 at LCRB 00813, 00815, Doc. 488-5 at 128,130.)

P. The Retirement Office

Lois Conrad was coordinator of the Retirement Office from 1982 until 1993. (Lois Conrad Dep. 19:11-22:21, 434-6 at 6-7.) The Retirement Office was tasked with the job of maintaining the Fund’s books and records, giving advice to and preparing benefits quotes for prospective retirees, paying benefits, as well as other administrative functions. (Conrad Dep. 32:14-24, 54:19-55:19, Doc. 434-6 at 9, 15; Kammerer Dep. 17:19-24, Doc. 434-18 at 5; Pl.’s Ex. 123 at LCRB 00590-00593, Doc. 491-3 at 28-31.) Conrad testified that, after the Board went to the multiple manager system proposed by Williamson/ASCO, the Retirement Office routinely received account statements sent every month by the various money managers. (Conrad Dep. 31:2-32:24, Doc. 434-6 at 9.) Conrad recalls Safeco having sent account statements to the Retirement Office, which she had then filed. (Conrad Dep. 33:12-34:5, Doc. 434-6 at 9-10.) Conrad also recalled that ASCO sent monthly statements to the Retirement Office explaining the performance of the Fund’s investments. (Conrad Dep. 63:7-21, Doc. 434-6 at 17.) ASCO also sent annual reports to the Retirement Office every year. (Conrad Dep. 64:18-65:6, Doc. 434-6 at 17.) Conrad testified that she would look over the account statements, use them to compile monthly balance sheets and yearly financial reports of the Fund’s assets and liabilities, income and expenses (see Def.’s Ex. 110 at LCRB 00663, Doc. 443-16 at 1 (1988 financial report disclosing the Fund’s four (4) investment managers, including Safeco and the QPA-2)), and then store them in a locked filing cabinet. (Conrad Dep. 32:14-24, 54:19-55:19, Doc. 434-6 at 9, 15.) Conrad stated that she prepared financial reports every year she was coordinator of the Retirement Office. (Conrad Dep. 55:10-14, Doc. 434-6 at 15.)

Conrad testified that she would file account statements based on certain criteria — which money manager, which period of time the statement covered, etc. (Conrad Dep. 33:2-34:3, Doc. 434-6 at 9-10.) Conrad stated that she never discarded any of the account statements. (Conrad Dep. 34:5-8, Doc. 434-6 at 10.) Conrad also testified that Board members received copies of the money manager account statements. (Conrad Dep. 34:16-22, Doc. 434-6 at 10.)

In 1991, Lois Kammerer joined the Retirement Office as a bookkeeper. (Conrad Dep. 39:5-17, Doc. 434-6 at 11.) Conrad testified that Kammerer was an employee in whom she had absolutely no confidence. (Conrad Dep. 39:17-40:9, Doc. 434-6 at 11.) Conrad stated “I couldn’t get anywhere with that woman who was supposed to help me, and she just did her own thing.” (Conrad Dep. 42:20-24, Doc. 434-6 at 12.)

In the fall of 1993, Conrad either resigned as coordinator of the Retirement Office (Conrad Dep. 41:6-42:24, Doc. 434-6 at 11-12; Kammerer Dep. 16:23, Doc. 434-18 at 5), or her position was eliminated