Full opinion text
AMENDED FINDINGS OF FACT AND CONCLUSIONS OF LAW ROBIN S. ROSENBAUM, United States Magistrate Judge. This cause is before the Court upon Defendant W. Anthony Huff and Relief Defendants Sheri Huff and Midwest Merger Management, LLC’s Motion for Amended Findings Pursuant to Rule 52(b), to Amend the Judgment Pursuant to Rule 59(e), and, Alternatively, for New Trial Pursuant to Rule 69(a) (“Defendant’s Motion”) [D.E. 314]. For the reasons set forth in this Court’s Order of this same date, the Court hereby amends its Findings of Fact and Conclusions of Law issued on September 30, 2010, 745 F.Supp.2d 1284, 2010 WL 3860721 (S.D.Fla.2010) [D.E. 308]. This Court held a seven-day bench trial in this matter. The parties had consented to trial before a United States magistrate judge, see D.E. 140, and the Honorable William J. Zloch had referred the matter to me in accordance with 28 U.S.C. § 636(b). [D.E. 160]. The parties filed certain stipulations for the Court’s consideration at trial. See D.E. 217 at 5-8. Following the trial, the parties submitted their Proposed Findings of Fact and Conclusions of Law [D.E. 290, D.E. 291], The Court has also reviewed the deposition transcripts of Vera Michele Brown, Danny L. Pixler, William Baumgardner, Jr., Richard Steen, Lloyd Davis, Ivan Dobrin, Brian Sly, and Thomas Cunningham, all exhibits entered into evidence at trial, Defendant and Relief Defendants’ Motion for Directed Verdict [D.E. 265], all filings in support thereof and in opposition thereto, the SEC’s Notice of Supplemental Authority [D.E. 300], Defendant and Relief Defendants’ Motion to Strike Notice of Supplemental Authority [D.E. 301], and all filings in support thereof and in opposition thereto. Pursuant to the requirements of Rule 52 of the Federal Rules of Civil Procedure, the Court now issues the following Findings of Fact and Conclusions of Law. 7. Background This action began on March 6, 2008, when the Securities and Exchange Commission (“SEC”) filed the original Complaint [D.E. 1] in this matter against Defendant W. Anthony Huff (“Huff”) and Relief Defendants Sheri Huff, Roxann Pixler, and Midwest Merger Management LLC (collectively “Relief Defendants”). Shortly thereafter, on April 4, 2008, the SEC filed its Amended Complaint for Injunctive and Other Relief [D.E. 15]. The Amended Complaint also sought relief against Defendants Otha Ray MeCartha, Charles J. Spinelli, Danny L. Pixler, Anthony Russo, and Relief Defendant Brent-wood Capital Corporation. See D.E. 15. Defendants, MeCartha, Spinelli, Pixler, and Russo consented to judgment against themselves, see D.E. 2, D.E. 3, D.E. 17, and D.E. 73, respectively, and the Court entered judgments and final injunctions against these Defendants. See D.E. 24, D.E. 23, D.E. 25, D.E. 74. As for the Relief Defendant Brentwood Capital Corporation, on May 21, 2008, the Court affirmed an Order of Default entered by the Clerk against Brentwood Capital Corporation, Inc. See D.E. 33. Because these Defendants and Relief Defendant no longer play a role in this case, these Findings of Fact and Conclusions of Law will not review their involvement except as necessary to explain currently pending matters. The Amended Complaint alleges that from 2001 through 2004, Defendant Huff, along with others, “siphoned tens of millions of dollars” from Certified Services, Inc. (“Certified”), a professional employee leasing organization. D.E. 15 at ¶ 1. According to the Amended Complaint, Huff secretly served as a “control person of Certified,” and, with others, employed “an elaborate scheme conducted in flagrant disregard of the federal securities laws.” Id. More specifically, the Amended Complaint asserts that Huff and others artificially inflated Certified’s financial condition and failed to disclose related party transactions that benefitted Huff and the others. Id. at ¶ 2. As a result, the Amended Complaint continues, Huff and others overstated Certified’s financial condition to the SEC and the investing public by approximately $112 million. Id. The Amended Complaint further contends that Huff and others accomplished this feat by recording almost $47 million in “bogus Letters of Credit” as an asset on Certified’s balance sheet while simultaneously failing to report approximately $65 million in liabilities. Consequently, Certified allegedly overstated its assets by approximately 35% and understated its liabilities by about 38% for the fiscal year-end 2002 and understated its liabilities by more that 50% for the fiscal year-end 2003. Id. In addition, the Amended Complaint accuses Huff of using his control over Relief Defendant Midwest Management, LLC (“Midwest”), Certified’s controlling shareholder, to divert money improperly out of Certified’s coffers and into his own pocket by orchestrating Midwest’s entry into “bogus agreements” with Certified. Id. at ¶ 3. As a result of these alleged violations, the SEC suggests, Huff and the Relief Defendants reaped “millions of dollars in ill-gotten gains.” Id. at ¶ 4. To remedy these purported transgressions, the SEC seeks (1) a declaration that Huff violated the federal securities laws as alleged in the Amended Complaint; (2) a permanent injunction enjoining Huff and his agents from violating Section 17(a) of the Securities Act of 1933, 15 U.S.C. § 77a, et seq. (“Securities Act”), and Sections 10(b) and 20(a) and Rule 10b-5 of the Securities Exchange Act of 1934, 15 U.S.C. § 78a, et seq. (“Exchange Act”), and from aiding and abetting any violation of Section 10(b) and Rule 10b-5 of the Exchange Act; (3) an order requiring sworn accountings from Huff and Relief Defendants Sheri Huff, Roxann Pixler, Midwest; (4) an order requiring Huff and the Relief Defendants to disgorge ill-gotten gains; (5) an order directing Huff to pay civil money penalties under the Securities Act and the Exchange Act; (6) an order barring Huff from serving as an officer or director of any public company; and (7) an order precluding Huff from directly or indirectly participating in an offering of penny stock. The SEC, Huff, and the Relief Defendants (collectively, “the Parties”) filed a Notice of Right to Consent to Disposition of a Civil Case By A United States Magistrate. [D.E. 160], The Honorable William J. Zloch then assigned this matter to me. See D.E. 160. The Court conducted a seven-day bench trial. [D.E.s 258-264]. Prior to trial, the Parties filed a Joint Pretrial Stipulation in which they entered into certain stipulations of fact. See D.E. 217 at 5-8. During the trial, the Court heard live testimony from Huff, Sheri Huff, Roxann Pixler, Charles Spinelli, Ivan Dobrin, Adam Dobrin, James Feltman, William Romashko, Otha Ray McCartha, Thomas Bean, and R. David Wallace. In addition, the Parties submitted by designation the depositions of Vera Michele Brown, Danny L. Pixler, William Baumgardner, Jr., Richard Steen, Thomas Cunningham, Lloyd Davis, Ivan Dobrin, and Brian Sly. See D.E. 220 at 3-15; D.E. 218 at 62-66. The Court has reviewed these deposition transcripts. The following exhibits were admitted into evidence during the trial: Plaintiffs Exhibits (“PX”) 7, 59, 86, 88, 105, 115, 150, 151, 158, 164, 167, 173, 178, 180, 182, 231a, 268, 308, 309, 341, 416b, 425, 448, 456b, 464, 490, 491, 505, 548, 550, 553, 554, 555, 556, 557, 560, 562, 564, 565, 566, 567, 570, 575, 576, 578, 579, 580, 583, 584, 585, 588, 590, 591, 594, 595, 599, 600, 608, 609, 612, 615, 616, 617, 618, 630, 631, 632, 635, 636, 637, 639, 643, 647, 652, 658, 659, 672, 674, 675, 676, 677, 678, 679, 680, 681, 682, 683, 691, 722, 723, 724, 725, 800, 802, 814, 816, 817, 818, 819, 820, 822, 823, 824, 827, 829, 830, 831, 832, 836, 845, 846, 847, 848, 849, 856, 862, 865, 866, 869, 872, 875, 877, 878, 879, 879b, 879c, 880, 881, 882, 883, 884, 885, 886a, 886b, 886c, 886d, 886e, 889, 890, 892, 907, 908, 909, 920, 921, 929, 930, 931, 932, 933, 934, 938, 966, 968, 969, 970, 972, 976, 977, 980, 984, 986, and 994 (pages strat 000482 — strat 000486 of what Defendant submitted to the Court as DX 35 prior to trial but did not seek to admit at trial); and Defendants’ Exhibits (“DX”) 4, 5, 6, 7, 13, 14, 20, 58, 61, 62, 67, 98, 117, 120, 149, 150, 151, 153, 154, 159, 160, 161 (the documents Defendant submitted to the Court as DX 25 and DX 26 prior to trial but did not seek to admit at trial under those exhibit numbers), and 162. After the trial, Huff and the Relief Defendants submitted a written Motion for Judgment pursuant to Rule 52, Fed.R.Civ.P. [D.E. 265]. During the trial, the Parties had agreed and the Court had authorized that the written Motion for Judgment would be treated as if it had been made at the close of the SEC’s casein-chief and renewed at the conclusion of all evidence in the event that the Motion had been unsuccessful at the close of the SEC’s case-in-chief, and that the Court would reserve ruling until the written Motion had been fully briefed and submitted to the Court. Trial Transcript (“TT”), pp. 1224, 1225. The SEC timely filed its written Response to Huff and the Relief Defendants’ Motion for Judgment [D.E. 293], and Huff and the Relief Defendants timely filed their Reply [D.E. 299], II. Findings of Fact A. Parties, Relevant Individuals and Entities, and Jurisdiction 1. The Court has jurisdiction over this action pursuant to Sections 20(b), 20(d), and 22(a) of the Securities Act, 15 U.S.C. §§ 77t(b), 77t(d), and 77v(a), and Sections 21(d), 21(e), and 27 of the Exchange Act, 15 U.S.C. §§ 78u(d), 78u(e), and 78aa. Defendant W. Anthony Huff 2. Defendant Huff does not have a college degree, but he did take some college courses and insurance courses, and he did graduate from the Dale Carnegie School. TV at 834, 1227-28. Defendant Huff is neither a certified public accountant nor a lawyer. Id. at 1228. 3. In the mid-90’s Defendant Huff filed for personal bankruptcy. Id. The bankruptcy court found, however, that Huff had non-dischargeable debt. Id. 4. Defendant Huff previously held State of Kentucky licenses for property and casualty insurance and for life and health insurance. Id at 834-35. In October 1998, however, following a contested proceeding, the Insurance Commissioner for the State of Kentucky either revoked or forced Defendant Huff to surrender his life and health insurance license. Id. at 836-38. Defendant Huff’s property and casualty insurance license expired. Id. at 836. 5. On November 6, 2000, Defendant Huff was indicted in the Western District of Kentucky for mail fraud, money laundering, and money-laundering conspiracy. DX 920; TT 839. The indictment pertained to Defendant Huffs association with All Risk Services, Ltd., a wholesale insurance brokerage business purportedly in the business of placing trucking insurance risks with various insurance companies. DX 920. According to the indictment, Defendant Huff approached insurance companies to obtain large insurance policies on behalf of North American Trucking Association members. Id. The indictment further alleged that Defendant Huff arranged for insurance premium-financing loans from a premium-financing company in order to cover the cost of the insurance premiums on the policies. Id. In so doing, the indictment continued, Defendant Huff falsely represented to the insurance premium-financing companies that the down payment on the policy had been made and that the monies from the insurance premium-finance agreement would be used to pay for the master insurance policies. Id. The indictment further asserted that instead of using the insurance premium-financing monies to pay for the insurance policy, Defendant Huff spent the monies for his personal benefit and for the benefit of his family members. Id. 6. On May 22, 2003, Defendant Huff pled guilty to three counts of mail fraud contained in the indictment. DX 921; TT 839-40. In the plea agreement, Defendant Huff agreed that he had obtained three insurance premium finance loans upon false representations that he would use the loan proceeds to pay premiums due on insurance policies issued by Liberty Mutual Insurance Company. DX 921. According to the statement to which Defendant Huff agreed in the plea agreement, however, after receiving the loan proceeds, Defendant Huff intentionally expended them for purposes other than paying the premiums to Liberty Mutual. Id. Huff further acknowledged in the plea agreement that he pled guilty “because he [was], in fact, guilty of these three charges.” TT at 841. 7. Prior to being indicted in the Western District of Kentucky, Defendant Huff had served as a director of two entities with offerings registered with the SEC. TT at 879. These entities included U.S. Trucking, where Defendant Huff held the titles of executive vice president and chairman of the board, and Professional Transportation Group, Ltd., where Defendant Huff was the chairman of the board. Id. at 879, 886. In his capacity as the executive vice president and chairman of the board of these companies, Defendant Huff had to and did disclose his background in offering materials and likewise had to and did sign publicly filed registration statements and reports. Id. at 885-87; see also PX 848 at 18, F-33. Some of the background information that Huff disclosed was negative in that it pertained to his bankruptcy in 1994. PX 848 at 18. 8. As chairman of the board at U.S. Trucking, Huff engaged in duties including raising capital, talking to the market place, communicating with shareholders, and conducting public relations, although he was not involved in the “day-to-day grind” of the company. TT at 884-85. Nor did Huff find potential acquisitions for U.S. Trucking. Id. at 884. Huff and former codefendant Danny Pixler also served as the sole members of U.S. Trucking’s audit and compensation committee. PX 848 at 18; TT at 880-81. Upon his indictment in the Western District of Kentucky, Defendant Huff resigned his official positions with U.S. Trucking and was removed from his position with Professional Transportation Group, Ltd. TT at 885-91. In the late 1990s, U.S. Trucking filed for bankruptcy or otherwise became defunct. Id. at 184. Since Defendant Huffs indictment in 2000, Huff has never served in name as an officer or director of any entity registered with the SEC. Id. at 891. 9. Following Defendant Huffs resignation from U.S. Trucking, U.S. Trucking continued to have debts and obligations. Id. at 212-13. Among these were debts and obligations to Wells Fargo; Nelligan, Tarpley, Andrew and Foley; Monarch Capital; and All State World Cargo, Inc. Id. at 212-14. Logistics Management Resources, Inc. (“LMRI”) became the successor corporation to U.S. Trucking. Id. at 211. 10. Huff carries a business card, but the card does not state his position, title, or company affiliation. TT at 1071. Relief Defendant Sheri Huff 11. Relief Defendant Sheri Huff has lived with Defendant Huff for most of the time since she was 17 years old. TT at 353, 142. Although they were once married, Defendant Huff and Sheri Huff divorced in 1993. Id. Nevertheless, Relief Defendant Sheri Huff and Defendant Huff continue to refer in public to each other as “husband” and “wife” and to reside together. Id. Additionally, Sheri Huff still wears her wedding ring. Id. The Huffs also have children together. Id. 12. Sheri Huff owns a house at 313 Longview Park Place in Kentucky, where she resides with Huff. TT at 353, 142, 959-60. Huffs name is not on the property. Id. at 959-60. Sterling Development built and owned the home before Sheri Huff purchased it. Id. Prior to living at that address, Sheri Huff and Defendant Huff resided at a house at 707 Oxmor Woods Parkway in Kentucky. Id. at 960. Previously, that house was owned by the Huff Grandchildren Irrevocable Trust, of which Defendant Huff is a trustee, but currently, Sheri Huff owns the property. Id. In addition to these residences, for a period in 2004, Sheri Huff stayed with Defendant Huff at a condominium in Hollywood, Florida, in part, so Huff could be close to Certified’s office in Fort Lauderdale. Id. at 404-05. Relief Defendant Roxann Pixler 13. Relief Defendant Roxann Pixler has been married to former Defendant Danny Pixler for the past 31 years. Id. at 133-34. Roxann Pixler worked for Gulf Northern, which changed its name to U.S. Trucking. Id. at 137. While employed at Gulf Northern, Roxann Pixler met Defendant Huff in the mid-1990’s. Id. She worked for U.S. Trucking until the fall of 1999. Id. From the mid-1990’s until at least 2005, Danny Pixler and Huff were involved in business together. Id. at 137-38. Roxann Pixler has resided with her husband Danny Pixler in various locations, including Fort Lauderdale, Florida. TT at 134. 14. Roxann Pixler eventually invested approximately $150,000 with Huff. TT at 181-82. When she asked him to put her investment into some type of written form, Huff told Roxann Pixler to “shut up,” told her she was a trouble-maker, and banned her from future meetings relating to the investment. Id. Charles Spinelli 15. Charles Spinelli (“Spinelli”) graduated from the Fordham University College of Business and the Fordham University Law School. TT at 183. 16. Spinelli first met Defendant Huff in approximately 1996, when Spinelli served as counsel for a small broker-dealer located in New York City. Id. at 184. At the time, Huff was a shareholder in U.S. Trucking, Inc., which was a client of the same broker-dealer. Id. Subsequently, U.S. Trucking retained Spinelli to perform some legal work. Id. 17. Between 1999 and 2002, Spinelli practiced law at a law firm called Levy & Boonshoft, P.C. Id. at 183. During that period, Spinelli and Levy & Boonshoft, P.C., represented Defendant Huff, Defendant Huffs entities, and Certified. Id. at 59, 204. In March 2002, however, Spinelli left Levy & Boonshoft, P.C., and stopped practicing law. Id. at 184, 203-04, 319; see also id. at 126. 18. In addition to providing legal representation to Huff prior to retiring his law license in 2002, Spinelli also had a separate business relationship with Huff beginning in 2001. Id. at 204. Spinelli’s personal relationship with Huff led to a partnership involving Spinelli and Huff as the majority partners, with Dan Pixler also receiving a percentage of profit from the venture. Id. at 196-97, 293, 309. Spinelli and Huffs partnership pursued a business enterprise intended to have involvement in three areas: (1) a professional employment organization (“PEO”); (2) an insurance carrier; and (3) a financing arm. Id. at 196. The companies corresponding to each of these functions were as follows: Certified was the PEO, Brentwood Capital (“Brentwood”) sought to serve as the insurance arm, and Midwest Merger Management, Inc. (“Midwest”), was intended to be the finance company. Id. at 196-97. Despite the existence of the partnership, no documents memorialized the relationship, and on paper, the companies did not reflect that they were controlled by the partnership. See id. at 292-94. 19. Nevertheless, those who interacted with Huff, Spinelli, and their entities saw them as a close group. William Baumgardner, who sold the PEO company Staff America to Certified, for example, described Huff, Spinelli, Pixler, those with whom they worked, and the various entities as being “a very tight group of people,” with Huff at the “dead center” of the relationship. D.E. 214-11 at 13. Baumgardner further explained, “[W]ho was Brentwood on a day, who was Huff on a day, who was Pixler on a day, it depended on the circumstances and the need. And that covers the whole time I knew them.” Id.; see also id. at 65 (“At the center of the hub would have been Pixler, Spinelli, one inch out Campitiello, Huff at the middle.”). 20. Based on Spinelli’s involvement with Certified, Brentwood, and Midwest, the United States of America criminally prosecuted Spinelli. Id. at 264-65. Spinelli pled guilty to a count of misprision of a felony and served a prison sentence. Id. at 265, 321. At the time that he testified at trial in the pending case, Spinelli was on supervised release from the criminal case. Id. at 264. Spinelli characterized his experience with the criminal justice system as “a very cathartic and important experience for me and my family and we are much, much better off as a result of it.” Id. at 321. 21. Additionally, the SEC filed the pending enforcement action against Spinelli as well as against Huff and other defendants. Id. at 278-79, 281. Prior to filing the enforcement action, the SEC took Spinelli’s deposition on more than one occasion. See id. at 266-73. Spinelli admitted when he testified at trial in this matter that during one of the SEC depositions, he committed perjury. Id. at 265-67. In making this admission, Spinelli explained, “When I originally testified in 2005 with the SEC, the purpose of failing to disclose the truth was an attempt to protect myself from prosecution, and others.” Id. at 266; see also id. at 300 (“I was trying to protect myself and Mr. Huff”), 317 (“I was concerned about potential prosecution for [Spinelli and Huff]”). As a result of Spinelli’s involvement with Huff, he had come to view Huff as a “friend” and a “brother.” Id. at 317. 22. Spinelli entered into a settlement agreement with the SEC to resolve his involvement in the instant matter. Id. at 279-82. The terms oí the settlement agreement administratively barred Spinelli from acting as a securities lawyer before the SEC, from serving as an officer or director, and from participating in penny stocks, and it enjoined Spinelli from violating securities laws. Id. Additionally, under the terms of the settlement agreement, Spinelli agreed to cooperate fully with the SEC. Id. at 282. The settlement agreement did not subject Spinelli to disgorgement. Id. at 282. As for Spinelli’s take on the SEC’s enforcement action against him, Spinelli opined that he was not a “fall guy,” but, rather, “got exactly what [he] deserved.” Id. at 266. 23. In addition to the criminal and SEC enforcement litigation, the bankruptcy trustee acting on behalf of the creditors of Certified also sued Spinelli and Huff, as well as others. Id. at 280, 291, 319. Spinelli and Huff settled the litigation with the bankruptcy trustee. Id. at 291. 24. Continental Casualty Company (“CNA”), an insurance company, and Staff America, a PEO company that Certified acquired, also each filed a lawsuit against Spinelli, Huff, and others. Id. at 279-80, 318, 324. Spinelli’s insurance carrier set-tied Spinelli’s involvement in the CNA lawsuit for $40,000. Id. at 279-80. Huff settled the CNA litigation for a lot more. Id. at 318-19. 25. The Court finds Spinelli to have been a credible witness during the trial of this matter. His demeanor on the witness stand, his responses to questioning — particularly cross-examination, and other evidence corroborating Spinelli’s testimony guide the Court in this determination. Although the Court initially had some reservations about believing an individual who admitted to having committed perjury in the course of the 2005 SEC deposition preceding the filing of the matter at hand, the reason expressed by Spinelli for having done so — that he was trying to protect himself and others from legal action— rings true and no longer existed at the time that Spinelli testified in the instant matter. Moreover, as reflected through the citations supporting other findings of fact in this document, in many cases, other evidence tends to corroborate Spinelli’s testimony. In addition, as Spinelli was on supervised release at the time of his testimony, he stood to lose more than the average witness, had he perjured himself in a detectable way during this trial. Finally, and significantly, Spinelli’s demeanor on the stand and answers to questions concerning his involvement in the matters at issue in this case reflect that Spinelli has taken responsibility for his actions and that he appears genuinely to have turned over a new leaf. Midwest Merger Management, Inc. 26. Midwest was formed on July 20, 2001, as a limited liability holding company to hold the stock of Certified. D.E. 214-3 at 27 (p. 265); D.E. 217 at 8. Midwest had offices in Kentucky. TT at 874. Brentwood operated out of the same office space as Midwest in Kentucky. Id. at 873-74. 27. Originally, Relief Defendants Sheri Huff and Roxann Pixler each owned a 50% interest in the company, although Roxann Pixler never took part in any initial meetings regarding the formation of Midwest. Id. at 146, 152; PX 683 at 3. The opening corporate records for Midwest identified Roxann Pixler as the secretary of the company, although no one asked her whether she wished to assume this role, and she never actually performed any functions in this position. Id. at 148. Nor did Roxann Pixler ever manage or control Midwest. Id. at 147-48; see also id. at 176. She similarly never made any business decisions for the company or contributed any capital to it. Id. at 147-48, 164. 28. Likewise, Sheri Huff never invested any money into Midwest. Id. at 368. She testified that she has no understanding as to why she had an ownership interest in Midwest, as she never negotiated with anyone to obtain it. Id. at 367-68. In addition, Sheri Huff did not know who the other owners of the company were, had no understanding of whether Midwest ever made money, and had no knowledge of the company’s business. Id. at 367-69. Nor did Sheri Huff actually ever perform any work for Midwest. Id. at 373, 403-04; PX 909 at 3. On occasion, however, Sheri Huff personally signed documents and others signed her name on her behalf for Midwest. PX 909 at 3. 29. Defendant Huff placed Sheri Huff as his nominee for any financial benefit he would receive from Midwest. TT at 870. At the time that the ownership structure of Midwest was being determined, Huff was winding down liabilities he had from prior business dealings. Id. at 871. In addition, at the time of Midwest’s formation, Huff still had personal liability arising out of guarantees he had made in connection with U.S. Trucking. Id. at 872-74. Indeed, in order to satisfy a personal guarantee Huff made to GE Lending in connection with the U.S. Trucking business, Huff had to pay more than a million dollars. Id. at 872-73. As Danny Pixler explained with respect to Midwest, he and Huff “decided to put a company together that we could hold our assets through our wives in and go back into business.” July 9, 2009, Deposition of Danny Pixler (“Pixler Depo.”) at 166. Subsequently, Huff arranged for the paperwork to establish Midwest’s structure to be drawn up. Id. at 264-65. 30. At some point in time prior to the filing of Midwest’s 2001 tax return, the ownership interests changed so that Roxann Pixler held 40% interest in the company, even though she signed no document authorizing a reduction to her share in the company. TT at 147; see also PX 308: PX 309. When Roxann Pixler held a 40% interest, Relief Defendant Sheri Fluff held a 51% interest in the company, and Vera Michele Brown (“Brown”), who has served as Defendant Huffs secretary since approximately 1995, held the remaining 9%. TT at 147, 353, 369-75; see also PX 308; PX 309. 31. Defendant Huff is Brown’s boss, and Brown has, on many occasions, signed Sheri Huffs name. TT at 147, 158, 353, 369-75. Brown also conducted some of Defendant Huffs banking activities, answered phones, and picked up the Huffs’ son from school. TT at 367. Brown did not sign any documents for Midwest unless Defendant Huff authorized her to do so. D.E. 214-17 at 14. 32. By the time that Midwest filed its 2003 tax return, the ownership interests in the company had changed again. PX 680. Although Roxann Pixler continued to own 40% of the company, Sheri Huff at that time held a 59% share, while Brown held 1%. Id. These interests remained the same through at least the filing of Midwest’s 2005 tax return. See PX 681; PX 682. As of the time of trial, Roxann Pixler owned no part of Midwest, although she never signed a document giving away or otherwise assigning her interest in the company. TT at 178. Instead, the Huff Grandchildren Trust is the 100% owner of the company. Id. 33. Midwest’s tax returns show the following ordinary income or loss for each of the following years: 2001: -$744 (PX 308); 2002: -$755,749 (PX 309); 2003: $362,689 (PX 680); 2004: $909,834 (PX 681); 2005: -$569,231 (PX 682). In 2004, Roxann Pixler received $60,379.98 from Midwest Merger. TT at 177; PX 683 at 6. She used the money to pay taxes related to Midwest for that year. TT at 177. The $60,379.98 is the only money that Roxann Pixler ever received from Midwest. Id.; see also PX 683. Between 2002 and 2005, Sheri Huff received approximately $899,714 from Midwest. TT at 388-400, 405. 34. In 2005 Defendant Huff became a manager of Midwest. Id. at 149. Roxann Pixler did not participate in that decision and was not asked for involvement in that determination. Id. Even prior to this time, however, Huff made the substantive decisions with regard to Midwest and ran it on a day-to-day basis. Id. at 205, 413, 871-72. Although Roxann Pixler originally believed that Midwest was “Danny [Pixler] and Anthony [Huffs], and ... they were taking care of everything,” she subsequently came to believe that Huff was controlling Midwest. TT at 149, 162. Huff even had a Midwest e-mail address— ahuff@midwestmerger.com. PX 635; TT at 920. In hindsight, Danny Pixler agreed that he never made decisions regarding Midwest’s business. Pixler Depo. at 173. Instead, Huff did. Id. at 173-74. 35. As for Brown’s involvement in Midwest, Brown never directed any of Huffs activities with regard to Midwest. TT at 845. Instead, Huff was always the decision-maker, and Midwest always did what Huff recommended. Id. at 843, 1057. Huff gave Brown duties to perform, and she executed those tasks. Id. For example, if transactions required negotiations between Midwest and Certified, Huff, not Brown or anyone else, negotiated, even though Brown signed resulting agreements on behalf of Midwest. Id. at 845-47. To the extent that Brown ever offered any opinions regarding Midwest, Huffs opinion controlled, and he would have overruled Brown, had she ever disagreed. Id. at 842-44. In fact, however, Brown never disagreed with Huff. Id. at 844. 36. Based on the findings of fact set forth both previously and below in these Amended Findings of Fact and Conclusions of Law, this Court concludes that Huff always controlled Midwest and that Sheri Huff and Roxann Pixler never had any substantive involvement in the company. Rather, they always acted essentially as straw owners. 37. Spinelli had a consulting contract with Midwest. Id. at 215. Under the consulting contract, Spinelli received payments of $10,000 per week from Midwest. Id. These payments to Spinelli from Midwest did not benefit Certified. Id. 38. Midwest had a controlling interest in Certified’s stock. Id. at 152. 39. Midwest had at least three bank accounts at National City Bank until the accounts were closed in 2005. TT at 1005-06. Certified Services, Inc. 40. According to filings with the SEC, Certified was incorporated in Nevada in 1999. D.E. 217 at 5. Certified registered its class of common stock, par value $.0001 per share, with the SEC and therefore was subject to the disclosure and reporting provisions of the federal securities laws. Id. Certified traded on the NASD OTC Bulletin Board under the ticker symbol CSRV. See PX 831 at Part II, Item 5. 41. On November 21, 2001, Midwest acquired 52.6% of the issued and outstanding common stock of Certified after Huff had recommended to Midwest that it purchase Certified. TT at 245, 1057; D.E. 214-3 at 3 (p. 166); D.E. 217 at 5. Pixler learned of Certified from Huff. Id. at 265-67. Although Certified previously had stated in its SEC filings that it provided services to mortgage, real estate, and other financial service firms and their customers, D.E. 217 at 5, at the time that Midwest purchased Certified, Certified was a shell without an operating business, and its price per share never exceeded $.40 in 2001. TT at 245, 1057; PX 677 at Certified Form 10K-SB for the period ending Dec. 31, 2001, at Item 5. Market for Registrant’s Common Equity. 42. On November 28, 2001, Midwest made various filings with the SEC in relation to its purchase of a majority interest in Certified. D.E. 217 at 5-6. Among these, Midwest filed Schedule 13-D disclosing that it had a beneficial interest in the common stock of Certified and Forms 3 and 4 disclosing that Midwest had acquired more than a 10% direct interest in the common stock of Certified. Id. 43. Certified then began focusing on acquiring PEO businesses. See D.E. 217 at 6. A PEO serves as the employer of its client companies for purposes of providing benefits, paying taxes, ensuring human resource compliance, and engaging in similar functions. TT at 70. In approximately November 2001, Certified purchased all of the issued and outstanding common stock of America’s PEO Holdings, Inc., a PEO business. Id. at 1048; D.E. 217 at 6. 44. Ivan Dobrin (“Dobrin”), who effectively managed the PEO the Cura Group, Inc. (“Cura”), met with Defendant Huff and Danny Pixler in Kentucky in an effort to have Midwest acquire Cura. TT at 73-75. At some point during the meeting, Pixler and Dobrin’s colleague left, leaving Dobrin and Defendant Huff alone. Id. at 73. At that time, Dobrin and Defendant Huff engaged in further discussions and developed a plan for the acquisition of Cura. Id. at 73-74. In the summer of 2002, Certified acquired Cura, which was headquartered in Fort Lauderdale. Id. at 74; D.E. 200-3 at 7-8. 45. Certified’s acquisition of Cura occurred in three stages. Id. at 75. In March 2002, Certified wired $1 million to Cura and effectively took over control of the company. Id. Certified then bought a significant portion of the stock of Cura in June 2002, completing the purchase of Cura’s stock and the acquisition of the company on December 31, 2002. Id. At that time, Cura became an operating subsidiary of Certified. Id. 46. Certified also acquired other PEO businesses such as Staff America. Id. at 511-12. William Baumgardner (“Baumgardner”), who started Staff America and conducted discussions with Certified regarding the arrangement by Certified of a letter of credit for Staff America, stated that his initial discussions with Certified were with Huff and Dobrin. D.E. 214-11 at 3, 10-11. Baumgardner understood that Huff represented Certified. Id. at 11. Based on his dealings with Huff, Baumgardner came to regard Huff, in his “mind and heart, [as] [someone who] would lie if his lips would move. Everything that came to be promised came with strings, attachments, different terms, anything. Everything changed, everything. Nothing was as he agreed to do, nothing....” Id. at 19. 47. All of Certified’s acquisitions went through Midwest, and Certified used capital from Midwest to obtain them. TT at 512-14. Subsequently, Certified combined all of its PEO operating subsidiaries under the name Certified HR Services, which remained a subsidiary of Certified. Id. at 75, 507-08. 48. Danny Pixler held the positions of president and chief executive officer of Certified. D.E. 200-3 at 6. He also served as the president of all of Certified’s subsidiaries. Id. at 7. Before Pixler became an officer of Certified, however, Pixler was compensated by Brentwood for his work for Cura/Certified. Id. at 12. Pixler also received compensation from Midwest. Id. at 13. Brown testified that she worked for Pixler at Certified as Pixler’s secretary, although Pixler was located in Fort Lauderdale, and Brown was in Kentucky. D.E. 214-17 at 4-6. Pixler, on the other hand, disputed this assertion. D.E. 20(M at 17. In view of her location, her subservient position to Huff, and the facts that Pixler had his own secretary in Fort Lauderdale and Brown admitted that at the time that Brown was supposedly working as Pixler’s secretary she continued to serve as Huffs secretary and to do work for Midwest, this Court does not find Brown’s assertion to be credible. See 214-17 at 5-6. Nevertheless, Brown received her compensation from Certified. D.E. 200-4 at 17. 49. Following Certified’s acquisition of Cura, Dobrin remained involved with the company as the managing director. Id. at 76. In his position as managing director, Dobrin had responsibility for sales, workers’ compensation, and operations. Id. These duties required Dobrin to interact with Defendant Huff. Id. at 76-77. Typically, Dobrin communicated with Huff several times weekly regarding sales, workers’ compensation, operations, and other matters. Id. at 76-77, 112. Certified also communicated with Huff regarding its financials. Id. at 535. 50. In addition, Adam Dobrin, who performed information analysis and report gathering at Cura and Certified from 2002 through 2004, sent Huff, Pixler, and others weekly reports summarizing the operations of the company, including analysis of weekly revenue, changes in claims, and new and terminated business. TT at 508-09, 521-22. Although Adam Dobrin ceased sending the reports for a few months, he resumed providing them to Huff after the break. Id. 51. Based on his frequent interactions with Huff between 2002 and 2004, even though on paper Dobrin reported to Danny Pixler, Dobrin felt that he really reported to both Pixler and Huff and concluded that, with regard to Certified, Huff “was the man. He ran, he made all the ultimate decisions.” TT at 78, 81, 87, 113. Adam Dobrin agreed. See id. at 513-14, 517-18 (Adam Dobrin stating, “To me, it seemed that the larger macro decisions were influenced greatly or derived from Midwest,” and Pixler, Ivan Dobrin, and Ray McCartha deferred to Huff). Dobrin further described Huff as the “puppet master,” clarifying that Huff was “running the show from top to bottom.” Id. at 114. In fact, Huff specifically described himself to Dobrin as the “king maker,” meaning that he preferred to control things from the background rather than being the man in charge by name. Id. at 115-16. 52. Dobrin wanted Certified to acquire a company called Presideon, for example, so he discussed the matter with Danny Pixler. Id. When Pixler opined that it was a “terrible idea,” Dobrin approached Huff about the plan. Id. Nearly immediately thereafter, Pixler returned to Dobrin, saying how good the idea of acquiring Presideon was. Id. 53. On another occasion, Dobrin had scheduled a vacation. Id. at 80. Although Certified/Cura was going through some upheaval at the time, Dobrin advised Pixler that Dobrin still intended to take his vacation. Id. at 80-81. Pixler did not object. Id. at 81. Later that day or the next day, however, Huff called Dobrin and told Dobrin that he really needed Dobrin not to go on vacation. Id. Consequently’, Dobrin canceled his plans. Id. 54. Similarly, at some point, Dobrin mentioned to Huff that the sales people had expressed concern about Certified/Cura because it was going through a difficult time. Id. at 82. Dobrin asked Huff to come down to South Florida to speak to the sales force because Huff “was running the show.” Id. at 83. When Huff met with the sales force, he committed to doing things that would improve the lives of the sales people. Id. 55. Huff also frequently called Danny Pixler on the telephone. TT at 86. These calls occurred at multiple times throughout the work day and into the evenings. Id. Indeed, Dobrin recalled that Pixler received pages to speak with Huff on the telephone two to three times an hour at Certified’s offices. Id. Because of the high frequency of calls that Pixler received from Huff, Dobrin suggested that they make up an alias for Huff so the same page would not recur so often. Id. In Dobrin’s opinion, “there was no question” that Huff was more “dominant” than Pixler. Id. at 87. 56. In the spring or summer of 2002, Dobrin became a member of the board of directors of Certified after Huff asked him to do so. TT at 83-84. Dobrin remained on the board until he left Certified in 2004. Id. at 84. Certified had approximately five board-of-director meetings during this time. Id. at 121-22. Although Huff attended none of these meetings, id. at 122, the meetings were not really substantive. According to Dobrin, little discussion occurred, and the attendees were there to “rubber-stamp” proposed actions. Id. at 85-86. • 57. After Dobrin left Certified, he remained in touch with Huff. TT at 87. Dobrin attempted to work with Huff regarding the acquisition of other businesses for Certified. Id. In so doing, Dobrin never spoke with anyone other than Huff. Id. at 87-88. 58. Like Dobrin, Spinelli testified that Huff “was, for all intents and purposes, running the operations of Certified .... ” Id. at 251. 59. Through Midwest’s ownership of Certified’s common stock and preferred stock that had voting rights, Huff controlled a majority of Certified’s stock. TT at 1402. Huff also participated in discussions with Breene Murphy, an investment firm, regarding marketing Certified’s securities. See D.E. 214-15 at 9. In addition, Huff participated in discussions regarding financing for Certified with the Lauras Family of Funds. See id. 60. Brown, Huffs administrative assistant, had check-writing privileges on at least one of Certified’s bank accounts. TT at 1036. 61. Sheri Huff was never involved in the business affairs of Certified. TT at 404. 62. Certified operated out of offices located in Fort Lauderdale, Florida. TT at 993-94. Certified also had office space in New York where Brentwood was located and where Huff had an office. Id. at 222. Brentwood 63. Brentwood had offices in Kentucky. TT at 873-74. At its Kentucky location, Brentwood operated out of the same offices as Midwest. Id. 64. Although Sheri Huff was identified as a consultant for Brentwood, she never performed any work for the company. TT at 373-74, 404, 875; PX 909. Nevertheless, Sheri Huff reported $151,875.03 in income from Brentwood during 2002. PX 909 at 7-8; TT at 379-80, 384-85. In 2003, Sheri Huff reported $211,666.72 in income from Brentwood. PX 909 at 8; TT at 380, 384-85, 405. In total, Sheri Huff received $2,086,000 from Brentwood. Id. at 877. 65. The income that Sheri Huff received was Defendant Huffs salary draw from Brentwood. TT at 202-03, 875. Huff made the decision to have his Brent-wood monies paid to Sheri Huff because of a concern about outstanding liabilities relating to prior businesses. Id. at 203, 879. In addition, Huff received payments from Brentwood by cash, checks, and wire. Id. at 876. Huff maintained a Brentwood email address. Id. at 530. 66. Besides Brentwood, a separate corporation called Brentwood Realty Corporation (“Brentwood Realty”) existed. In 2002, Sheri Huff solely owned Brentwood Realty Corporation. TT at 916. Subsequently, the company changed its name to SDH (for Sheri D. Huff) Realty. Id. Brentwood Realty had its offices at the same location as the offices of Midwest and Brentwood. See PX 609. Huff signed substantive documents on behalf of Brent-wood Realty. TT at 918; PX 609. B. The Events Preceding Certified’s Demise Certified’s Insurance Problem 67. Certified’s clients were required to carry workers’ compensation insurance. D.E. 200-3 at 8. Thus, one of the services that Certified and its subsidiaries offered its clients included providing for their workers’ compensation insurance needs. Id. Before June of 2003, Cura covered its clients’ workers’ compensation insurance needs through a series of policies with CNA Insurance or one of its subsidiaries. Id. CNA allowed Cura, under assignment agreements, to bring other subsidiary PEO businesses into the CNA policy. Id. Thus, Certified used this arrangement to provide workers’ compensation insurance to the clients of all of its subsidiaries. Id. 68. By the late summer of 2002, however, CNA advised Cura/Certified that it would not renew the workers’ compensation insurance policies after June of 2003. D.E. 200-3 at 8, 13. CNA also informed Cura/Certified that, as of the summer of 2002, Cura/Certified’s deductible under the policies would be increased to $1 million per occurrence. D.E. 200-3 at 12-13. This meant that for the remainder of the existence of the CNA policy, Cura/Certified was responsible for claims up to $1 million, and CNA was responsible for amounts over $1 million on any claims. Id. at 13; see also TT at 326-27. During the entire pendency of the $1 million-per-occurrence deductible on the CNA policy, no occurrence ever exceeded the $1 million deductible. D.E. 214-2 at 19. 69. Despite the deductible, if a covered employee filed a legitimate claim, CNA generally would pay the claim, regardless of its amount, and then seek reimbursement from Cura/Certified. D.E. 200-3 at 14. This is because the carrier (CNA) bears the ultimate responsibility for ensuring that legitimate claims are paid, regardless of whether the insured eventually reimburses the carrier. TT at 328. Legitimate claims may continue indefinitely, such as in the situation where a worker suffers a permanent injury requiring significant future medical treatment. The monies to be paid in the future on claims already made is called the “claims tail,” and it can be quite substantial. 70. To guard against the risk of nonpayment by the insured on claims below the deductible that the insurer pays in the first instance, insurers such as CNA require collateral, generally in the form of letters of credit or trust arrangements. Id. at 328-29. The amounts required as collateral are determined by estimates of the amounts for which the policy holder is expected to be liable over time. Id. at 335. 71. Because CNA would no longer provide the required coverage as of June 2003, Cura/Certified searched for another carrier. D.E. 200-3 at 9. Huff was involved in trying to find such an alternative carrier. Id. at 10. Cura/Certified, however, could find no alternative insurance carrier that would provide workers’ compensation coverage to Cura/Certified on a national basis. Id. at 9. Consequently, Cura/Certified attempted to procure workers’ compensation insurance coverage from a variety of regional carriers. Id. at 9-12. In the meantime, however, Certified did not set any cash aside to deal with claims that might be made after the CNA policy ended in June 2003. Id. at 21. 72. One of the insurance providers from whom Cura/Certified ultimately obtained some coverage was Providence Property Insurance Company. D.E. 200-3 at 11. In order for Providence to provide insurance, Midwest put up collateral of either $1 million or $2 million. Id. 73. With regard to the state of Florida, Union American Insurance Company required a $3.5 million letter of credit as collateral. D.E. 200-3 at 11. Thus, on November 11, 2003, UBS issued a $3.5 million letter of credit. See PX 505; see also TT at 908. UBS was Harmon Burns’s bank. TT at 908. Harmon Burns, in turn, was a client of Brian Sly, a substantial investor in Midwest and in Huffs other business ventures. TT at 908, 910-14, 928-940. In connection with the $3.5 million letter of credit, Midwest, Certified, and Huff personally, as well as jointly and severally, promised and guaranteed to pay Brian Sly $50,000 upon the establishment and issuance of the letter of credit. TT at 895-96. Huff signed this document in his personal capacity and as an agent for Midwest. Id. at 897. Huff also bound Certified to this agreement, as he was the only person other than Sly signing the document, which bound Midwest, Certified, and Huff “personally, jointly and severally.” PX 505. Huff understood this document to represent his personal guarantee to Sly that monies extended under the letter of credit would be paid back. Id. at 896. If someone actually drew down on a letter of credit, Certified would have been the liable party because the letters of credit were posted on Certified’s behalf. TT at 866. The Letters of Credit 74. In the spring of 2002, Huff, Spinelli, and Otha Ray McCartha attended a meeting with Bill Leyton (“Leyton”), the purpose of which was to explore financing opportunities for Certified. TT at 205-06. Following this meeting, Huff and Leyton had another conversation, and, as a result, Brentwood and Certified started a business relationship with Leyton. Id. 75. With regard to Brentwood, Leyton was to provide a letter to act as a balance sheet enhancement. TT at 206-07. The purpose of the letter was to boost Brent-wood’s balance sheet so it would qualify to purchase an insurance carrier. Id. at 207-OS. More specifically, the letter regarded an account that Leyton had that Brent-wood would “lease” and carry on its books as an asset. Id. The amount of the “leased asset” was approximately $5.2 million, and the “lease” payments were $29,000 periodically. Id. at 220-21. To pay the lease fee, monies were sent to Strategic Bancorp. Id. Huff and Spinelli authorized such payments. Id. at 219-21, 242; see also, e.g., PX 88. Spinelli and Huff purposely chose not to disclose the fact that Brentwood did not own the asset and the nature of the “leased asset” to auditors. Id. at 207-08. Audit financials were then prepared based on the inclusion of the “leased asset” in Brentwood’s stated assets. Id. 76. As for Leyton’s involvement with Certified, Leyton provided letters of credit to Certified. TT at 208. In mid to late 2002, after Leyton had provided Certified with four or five letters of credit, one of the letters of credit was sent to McCartha’s attention at Spinelli’s office. Id. The letterhead logo of United California Bank, the bank that purportedly issued the letter of credit, however, became dislodged from the letter and fell off. Id. at 208-09, 249. 77. As Huff acknowledged in his testimony, Huff, Spinelli, and McCartha were aware that the logo of United California Bank on the letterhead had fallen off. Id. at 1058-59, 1404-07; see also id. at 208 (Spinelli’s testimony that Huff was aware). In fact, Huff stated that what he described as the corporate seal did not look “official” and instead appeared to have been “pasted on.” Id. at 1059, 1407. Consequently, Huff and McCartha had a conference call with Leyton during which Leyton advised them that the letter was a sample for recording or filing purposes only. Id. at 209. Huff subsequently advised Spinelli of this conversation. Id. Despite this unusual occurrence, Certified continued its relationship with Leyton and continued to rely upon the letters of credit he supplied through Strategic Bancorp. Id. Spinelli explained that he was, nonetheless, concerned that the program might not be legitimate. Id. The last of the purported letters of credit bearing United California Bank’s logo was dated September 16, 2002. See PX 59. Thus, this incident must have occurred prior to that date. 78. When Certified acquired Staff America, part of the transaction required the provision of a letter of credit to Staff America. TT at 243-44. As a result of a conversation that William Baumgardner had had with Huff and Dobrin in August and following negotiation and payment of origination fees of approximately $400,000 by Staff America to Brentwood, a purported letter of credit dated August 30, 2002, was to be provided on behalf of Staff America to CNA. D.E. 214-11 at 14-15, 18. Although Staff America paid the fees to Brentwood, Baumgardner understood that the beneficiaries of this payment were Huff, Spinelli, Pixler, those with whom they worked, and “whatever company they wanted it moved to, to include Brentwood and Certified and Midwest ..., whoever.” Id. at 18. The letter of credit provided turned out to be fake. TT at 243-44. According to Baumgardner, Huff was the leader of the group who provided the letter of credit at issue. D.E. 214-11 at 55; see also TT at 318 (Spinelli’s testimony that “I don’t think there’s any doubt that Mr. Huff controlled Certified and Midwest and, to a large extent, Brentwood. Whatever he wanted to have occur occurred in ... those three enterprises.”). 79. In September 2002, Baumgardner had another meeting with Huff, Pixler, Spinelli, Dobrin, and others. D.E. 214-11 at 19-20. This meeting concerned the provision of a second letter of credit. Id. at 20. Huff ran the meeting. Id. As Baumgardner described, “If Huff was present, Huff was in control.... [WJbat Huff said, went.... If Huff wasn’t happy, wasn’t nobody going to be happy.” Id. As a result of this meeting, a second letter of credit was issued to CNA on behalf of Staff America. Id. at 22-23. It, too, turned out not to be valid. See id. at 23. 80. In August and September 2003, CNA, to whom Certified had provided some of these fraudulent letters of credit, became aware that the letters of credit it was holding for Cura/Certified and its subsidiaries were not valid. TT at 338-39; PX 966. Although nothing in the appearance of the letters of credit tipped off CNA, when CNA attempted to draw on the letters of credit, Bank of the West and United California, the banks that purportedly issued the letters of credit at issue, informed CNA that they had no record of such letters of credit. TT at 339, 347-48; PX 966. In all, sixteen letters of credit totaling in excess of $44 million were rejected as fraudulent. TT at 339-40; PX 966. These sixteen bogus letters of credit represent the only fraudulent letters of credit that William Romashko, a 38-year employee with CNA, is aware of that have ever been provided by policy holders to CNA. TT at 350. 81. In late 2003, CNA sued Midwest, Certified, and Huff personally regarding the bogus letters of credit. TT at 951-52; see also D.E. 200-3 at 15. 82. While this Court does not find that Huff had actual, definitive knowledge that the letters of credit were fraudulent, Huffs lack of concrete knowledge resulted solely from Huffs deliberate ignorance or, at best, severe recklessness. First, Huff knew something was wrong when the logo of United California Bank on the letterhead fell off. Indeed, that was the reason why he and McCartha called Leyton. Second, Huff was certainly aware that if he learned that the letters of credit supporting the CNA policy were, in fact, fraudulent, CNA would have to be advised, and the letters of credit would have to be replaced — no easy feat. Third, instead of contacting the purportedly issuing bank, the obvious source for ascertaining the validity of literally millions of dollars’ worth of letters of credit, Huff called Leyton, who plainly had reason to lie regarding the legitimacy of the letters of credit, since he was - paid to obtain them in the first place. Fourth, even after Leyton offered the flimsy, non-sequitur-of-an-excuse that the letterhead fell off because the letter of credit was a “sample,” Huff did nothing to investigate the situation any further, even though a simple telephone call to the purportedly-issuing bank would have quickly resolved the entire multi-million-dollar matter. Indeed, even Huff effectively acknowledged in his testimony that CNA should have been called. See TT at 1405. The Risk Allocation Agreement 83. Meanwhile, sometime after February 13, 2003, Certified and Midwest executed the Risk Allocation Agreement (“RAA”). See DX 14. Although the RAA indicates in its language that it was “made this 1st [d]ay of January 2002,” DX 14, in reality, the parties did not execute the RAA until some time after February 13, 2003. PX 115; D.E. 214-17 at 70; see also TT at 867-69. In fact, Anthony Russo, who signed the agreement for Certified as an executive officer did not become a member of Certified’s board of directors until April 27, 2002, and did not become the chief financial officer and chief executive officer of the company until August 7, 2002. PX 831 at 49 (Business Experience). Moreover, the first time that Certified referred to the RAA was in its 2002 10-KSB, filed March 31, 2003. See PX 831 at 4-5 (Risk Management Agreement). 84. Because the RAA was not executed until at least February 2003, at the time that Certified and Midwest executed the RAA, CNA was providing Certified’s workers’ compensation insurance coverage, and Certified was subject to a $1 million-per-occurrence deductible. The RAA purported to bind Midwest to procure workers’ compensation insurance and to provide workers’ compensation claims administration and management in exchange for a service fee to be paid by Certified. Id. The service fee varied at different times during the relationship between 3.5% and 4.2% of the gross payroll of Certified’s clients. TT at 1307-08; see also DX 14. 85. Russo signed the RAA on behalf of Certified, and Brown signed the RAA on behalf of Midwest. As Brown did not sign any documents for Midwest unless Huff authorized her to do so, D.E. 214-17 at 14, Brown’s signature on the RAA demonstrates that Huff was well aware of the contents of the RAA and had approved the agreement prior to Brown’s having signed it in 2003. Indeed, the Court concludes that Huff was not only aware of the contents of the RAA but that he was involved in developing it, as explained further later in these Amended Findings of Fact and Conclusions of Law. 86. According to the terms of the RAA, Midwest was to, among other tasks, “retain and service Workers Compensation Insurance coverage ... at its sole cost and expense ... [and] assume responsibility for and promptly make all required payments in excess of the applicable deductibles.” DX 14. Nothing in the RAA bound Midwest to make any workers’ compensation insurance or claims payments other than procurement and premium costs and amounts above the deductible. See generally DX 14; see also TT at 855-59. Because Certified was bound by the RAA to pay Midwest a service fee that greatly exceeded the cost of the insurance, see TT at 860-64, 1308; DX 14, however, Midwest’s payment of Certified’s premiums and claims cost Midwest nothing. Instead, under the RAA Midwest could collect premiums and claims payments from Certified and pay that money to Certified’s insurer on behalf of Certified. Id. at 859, 864. In fact, even if Certified failed to make its required insurance claim payments to CNA, Huff understood that under the RAA, Midwest would have no liability. Id. at 859. When Midwest collected money for insurance purposes from Certified or its subsidiaries, it had the obligation to use those monies to pay claims on behalf of Certified, its subsidiaries, and their clients. Id. at 862. In effect, Midwest essentially acted as a pass-through to the insurance companies. On occasion, Midwest may have paid Certified’s insurance premiums to the insurer and subsequently obtained repayment from Certified. Id. at 859-60. 87. Moreover, because the insurance companies were contractually bound to pay claims that exceeded the deductibles, despite the wording of the RAA, Midwest had no actual liability or risk for amounts beyond the deductible. TT at 858-59; see also DX 14. In addition, the RAA expressly provided that “Midwest’s compensation ... does not include the normal out-of-pocket expenses, including but not limited to long distance communication, airfare, hotel lodging and meals, transportation, express mail, etc., incurred by Midwest in performing the Services and carrying out its duties under the Agreement.” DX 14. In other words, besides the fee that Midwest was to receive under the RAA, it was also to be reimbursed for any expenses incurred in conducting its alleged duties under the RAA. In short, as the RAA was worded, it allowed Midwest to take a substantial amount of money from Certified and provide nothing of substance in return. See TT at 863. Although Midwest drained a substantial amount of money from Certified under the RAA, Midwest did not take the full amount of the fee allowed under the agreement. Id. at 863-64. 88. Prior to the RAA’s being put into place, Dobrin was provided with a copy of it to review and to comment upon. TT at 117. At the time, Dobrin was at Brent-wood’s offices in New York. Id. 89. Dobrin believed that Certified paid money to Midwest under the