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PENSION BEN. GUAR. CORP. v. GREENE

March 16, 1983

The PENSION BENEFIT GUARANTY CORPORATION, as Trustee of the Bollinger Corporation Salaried Employees Pension Plan and the Bollinger Corporation Union Employees Pension Plan and as Trustee of the Portersville Equipment Company Union Employees Pension Plan and the Portersville Equipment Company Salaried Employees Pension Plan, Plaintiff,
v.
Morton J. GREENE and Thomas R. Allen, Jr., as individuals and as former trustees of the Bollinger Corporation Salaried Employees Pension Plan, the Bollinger Corporation Union Employees Pension Plan, the Portersville Equipment Company Union Employees Pension Plan, and the Portersville Equipment Company Salaried Employees Pension Plan, and Economy Industrial Properties, Defendants



The opinion of the court was delivered by: BLOCH

 BLOCH, District Judge.

 Plaintiff, the Pension Benefit Guaranty Corporation (hereinafter referred to as "PBGC"), is the government body created by the Employee Retirement Income Security Act of 1974 (hereinafter referred to as "ERISA") to administer the Mandatory Pension Plan Termination Program. *fn1" Defendants Morton Greene (hereinafter referred to as "Greene") and Thomas R. Allen, Jr. (hereinafter referred to as "Allen") are residents of Pennsylvania. At all times relevant to this action, Greene and Allen were trustees under four pension plans and general partners in defendant Economy Industrial Properties (hereinafter referred to as "Economy"). This Court has jurisdiction under ERISA, 29 U.S.C. § 1132.

 The plaintiff's principal task under ERISA is to guarantee the payment of pension benefits to participants of terminated pension plans. The two individual defendants, Greene and Allen, were officers in five related Pennsylvania corporations and trustees of the trusts established to fund the four pension plans of those corporations. The pension plans were all terminated in 1976, and plaintiff was subsequently appointed as statutory trustee of the plans. Plaintiff brings this action to recoup certain monies from the defendants as follows: principal and interests on loans which the pension plans allegedly made to the corporations while the individual defendants were trustees; uncollected employee contributions; rental payments paid by two of the plans to Economy pursuant to, what plaintiff contends was, an illegal lease agreement; and certain interest payments from a plan investment which were sent to defendant Greene and which defendant Greene allegedly converted to his own use.

 The defendants all deny any liability to plaintiff and assert two counterclaims of their own. First, defendant Economy alleges that the lease agreement between the plans and Economy was valid and demands the balance of the rental payments owed. Second, the defendants Greene and Allen claim that, in 1976, they requested that plaintiff provide them with a statement of their vested benefits pursuant to 29 U.S.C. § 1025(a). *fn2" Defendants Greene and Allen further claim that plaintiff has failed and refused to provide the requested information and that this makes plaintiff liable to defendants Greene and Allen for $100 per day from the date of such refusal or failure pursuant to 29 U.S.C. § 1132(c). *fn3"

 At the pretrial conference, the parties indicated to the Court that the matter could be decided on motions for summary judgment. The Court agreed, and the parties have filed cross motions for summary judgment.

 The parties have stipulated to the facts of this case, and that stipulation is attached to this Opinion as an exhibit. However, in order to enhance the comprehendibility of this Opinion, the Court summarizes the major facts at this point. The plaintiff is a wholly-owned United States government corporation created by ERISA, 29 U.S.C. § 1302, to administer the mandatory pension plan to termination insurance program created by Title IV of ERISA.

 This action involves the following four Pennsylvania corporations: (1) Kincaid Industries, Inc. (hereinafter referred to as "Kincaid"); (2) Bollinger Corporation (hereinafter referred to as "Bollinger"); (3) Portersville Equipment Company (hereinafter referred to as "Portersville"); and (4) Superior Wall Products Company (hereinafter referred to as "Superior"). Moreover, it also involves four pension plans, namely: (1) the Bollinger Corporation Union Employees Pension Plan (hereinafter referred to as the "Bollinger Union Plan"); (2) the Bollinger Corporation Salaried Employees Pension Plan (hereinafter referred to as the "Bollinger Salaried Plan"); (3) the Portersville Equipment Company Union Employees Pension Plan (hereinafter referred to as the "Portersville Union Plan"); and (4) the Portersville Equipment Salaried Employees Pension Plan (hereinafter referred to as the "Portersville Salaried Plan.").

 At all times relevant to this action, Greene was a director, officer, or shareholder of Kincaid, Bollinger, and Portersville, and a half-partner in Economy, and Allen was a director, officer, or shareholder of Kincaid, Bollinger, and Portersville, and a half-partner in Economy. Superior was a wholly-owned subsidiary of Kincaid. Greene and Allen became trustees of the trusts for the two Bollinger plans in the mid-1960's, and of the trusts for the two Portersville plans in 1970. They attempted to resign their trusteeships in 1974, but, as will be discussed at a later point in this Opinion, their attempted resignations were not successful. It must also be noted that Greene, Allen, Kincaid, Bollinger, and Superior were all parties in interests with respect to the two Bollinger plans pursuant to 29 U.S.C. § 1002(14), and Greene, Allen, Kincaid, Portersville, and Superior were all parties in interests with respect to the two Portersville plans pursuant to the same section.

 All four corporations suffered financial difficulties in the early to middle 1970's, and Bollinger filed for bankruptcy in March of 1976. Portersville also filed for bankruptcy in April of 1976.

 The Bollinger Union Plan terminated in December, 1976, and the Bollinger Salaried Plan terminated in February, 1977. Likewise, the Portersville Union and Salaried Plans terminated in July, 1976. The plaintiff subsequently became statutory trustee of all plans.

 In addition to the stipulation of facts, the parties have filed affidavits, depositions, and a 644-page appendix that contains 62 joint exhibits, which the Court refers to in this Opinion. The Court, after carefully considering the motions, the stipulated facts and submitted materials, and the briefs of the parties, hereby grants the plaintiff's motion for summary judgment and denies defendants' motion.

 The plaintiff's claim contains both pre-ERISA and ERISA violation. Accordingly, the Court deems it appropriate to discuss the pre-ERISA and ERISA violations separately below. Moreover, as stated above, the defendants assert counterclaims which will also be discussed in a separate section of this Opinion.

 A. Pre-ERISA Claims

 The plaintiff alleges that Greene and Allen violated their fiduciary responsibilities as trustees of the trusts in the 1971-74 period in violation of Pennsylvania trust law. *fn4" In response to these claims, the defendants assert two major defenses. First, the defendants assert that the provisions of ERISA are inapplicable to most of the plaintiff's claims. *fn5" Second, the defendants contend that the six-year statute of limitations, under either Pennsylvania law *fn6" or ERISA, *fn7" bars any claim against them which arises from conduct that occurred prior to May 22, 1974. *fn8" The Court deems it appropriate to dispose of defendants' contentions before addressing the merits of plaintiff's pre-ERISA claims because resolution of these two contentions at this point will help facilitate orderly discussion and understanding of the pre-ERISA claims.

 It appears that defendants' first contention -- that the provisions of ERISA are inapplicable to several of plaintiff's claims -- is acceptable to plaintiff since plaintiff bases its claims for pre-1975 conduct on state law. However, the Court deems it necessary to address the issue because of the jurisdictional question which it raises.

 Title 29 U.S.C. § 1144(b)(1) provides that ERISA "shall not apply with respect to any cause of action which arose, or any act or omission which occurred, before January 1, 1975." In Martin v. Bankers Trust Co., 565 F.2d 1276 (4th Cir.1977), the plaintiff brought an action in federal court alleging an ERISA violation for acts which occurred before the effective date of ERISA. The Fourth Circuit held that ERISA's substantive provisions did not apply to the claim. The Third Circuit has also held that the language of 29 U.S.C. § 1144(b)(1) compels the conclusion that acts or omissions which occurred prior to the effective date of ERISA are not controlled by that Act. Reuther v. Trustees of Trucking Employees of Passaic and Bergen County Welfare Fund, 575 F.2d 1074, 1078 (3d Cir.1978). Thus, plaintiff's claims that arise from acts or omissions that occurred prior to the effective date of ERISA are controlled by state law, and not by ERISA. This gives rise to the question of whether state law claims can be heard in the same case as ERISA claims.

 The answer to this question is found in a Second Circuit opinion and a decision of this Court relying upon that Second Circuit decision. In Morrissey v. Curran, 567 F.2d 546 (2d Cir.1977), the defendants improperly administered a pension plan by: (1) misappropriating funds for personal use, (2) improvidently investing over $1 million in a foreign venture, and (3) paying a large sum to the administrator of the plan. Id. at 547. The district court dismissed the suit finding that all acts complained of occurred pre-ERISA. The Second Circuit reversed, reasoning that ERISA imposed a continuing duty to review and liquidate improvident investments. Thus, as to at least one of the claims, the defendants' fiduciary duty continued after ERISA. The Court held that that particular claim was within the "exclusive jurisdiction of that Act." Id. at 549. Moreover, the Second Circuit, relying upon the United States Supreme Court case of Aldinger v. Howard, 427 U.S. 1, 96 S. Ct. 2413, 49 L. Ed. 2d 276 (1976), indicated that the district court could take pendent jurisdiction over the other claims under state law. Id. n. 11, 96 S. Ct. 2421 n. 11.

 This reasoning was adopted by this Court in Trustees of the Retirement Benefit Plan v. Equibank, 487 F. Supp. 58 (W.D.Pa.), appeal dismissed, 639 F.2d 772 (3d Cir.1980). In the Equibank case, the Court held that the significance of Morrissey is two-fold. First, it highlights the difficulty of attempting to bifurcate pre-ERISA acts from post-ERISA acts. *fn9" Id. 487 F. Supp. at 62. Second, even though pre-ERISA acts or omissions are separate state law claims, Morrissey indicates that a court may assume pendent jurisdiction. Id.

 In this case, the Court believes that plaintiff has raised valid ERISA claims and violations. *fn10" Accordingly, the Court can assume pendent jurisdiction over plaintiff's pre-ERISA, state law claims. *fn11"

 Next, the Court disposes of defendants' statute of limitations argument, which lacks merit. As stated, the defendants contend that the six-year statute of limitations, under both Pennsylvania law and ERISA, bars conduct that occurred prior to May 22, 1974. The defendants raise the ERISA statute of limitations even though they acknowledge that ERISA was not in effect prior to 1975. The plaintiff asserts that the ERISA statute of limitations does not apply, and the Court agrees. This leaves the Pennsylvania statute of limitations to contend with.

 Greene and Allen became trustees of the trusts for the Bollinger plans in the middle 1960's and of the Portersville plans in 1970. Stipulation of Facts para. 15. They served in this capacity up until the effective date of ERISA. *fn12" Greene and Allen were named trustees in connection with written, expressed *fn13" trust funds and trust agreements. See generally Joint Appendix, Joint Exhibits 1-4 (pp. 1-73) and Joint Exhibits 8-13 (pp. 118-171). Accordingly, Greene and Allen were "express trustees."

 Under Pennsylvania law, an express trustee may not plead the statute of limitations as a defense. Sherwin v. Oil City National Bank, 229 F.2d 835, 836 n. 2 (3d Cir.1956); Pennsylvania Co. for Insurances on Lives v. Ninth Bank & Trust Co., 306 Pa. 148, 154, 158 A. 251 (1932). Thus, Greene and Allen, as express trustees, cannot plead the statute of limitations.

 Alternatively, even if the statute of limitations defense were available to Greene and Allen, the statute does not begin to run until the cestui knows, or under the circumstances ought to know, of the facts that give rise to the cause of action. United States v. Rose, 346 F.2d 985 (3d Cir.1965); Pennsylvania Co. for Insurances on Lives, supra, 306 Pa. at 155, 158 A. 251. The plaintiff was not appointed statutory trustee of the Portersville Plans until December of 1976 and was not appointed statutory trustee of the Bollinger Plans until May of 1977. Joint Appendix, Joint Exhibits 8-11 (pp. 117-128). Accordingly, plaintiff was not in a position to know of the facts which give rise to this action until, at the earliest, December of 1976. *fn14" Plaintiff filed the action in May of 1980, well within the six-year statute of limitations period. In sum, the statute of limitations defense is not available to Greene and Allen, but even if it was, plaintiff has filed this action in a timely fashion.

 Having disposed of these two issues, the Court turns its attention to the plaintiff's state law claims. Plaintiff claims that defendants Greene and Allen breached their fiduciary duty under state law by making certain loans, on behalf of the plans, and by failing to collect, or take other action in connection with, the failure of Bollinger and Portersville to make contributions to the respective pension plan trust funds. These claims will be discussed in more detail below.

 1. The Loans

 The Court first addresses the alleged illegal loan transactions. In late 1970, the first loan transaction took place. In that transaction, Greene and Allen *fn15" agreed, on behalf of the plans to loan Superior $39,200. *fn16" Stipulation of Facts para. 28. In return, Superior gave the plans a promissory note, which provided for 9 1/2 interest per annum and 16 quarterly payments, and a security in all of its machinery and equipment, inventory, and accounts receivable. Joint Appendix, Joint Exhibit 28 (p. 304). The financing statement filed in this transaction indicated that the collateral for the loan was free and clear of all liens and encumbrances. Joint Appendix, Joint Exhibit 28 (p. 307). However, as the plaintiff correctly points out, the inventory pledged as collateral was, in fact, encumbered because it had previously been pledged as collateral in another transaction. Joint Appendix, Joint Exhibit 6 (p. 91).

 Between June and September, 1972, the Portersville Union Plan loaned an additional $30,800 to Superior. Joint Appendix, Joint Exhibit 28 (p. 302). No new note was signed, or additional security given, for this second loan. *fn17" Greene Deposition of October 26, 1981, p. 137. On September 11, 1975, Superior paid the entire principal balance of $9,925 *fn18" due to the Bollinger Union Plan. Stipulation of Facts para. 28; Joint Appendix, Joint Exhibit 28 (p. 302). However, by February 17, 1976, the amount of $78,175, *fn19" which includes principal and interest amounts, remained outstanding to the other three plans. Joint Appendix, Joint Exhibit 28 (p. 302). Greene testified, at a deposition, that none of the quarterly installments required by the note were paid because there were no funds available. However, Greene further testified that he was not concerned because the loans were more than adequately covered by the collateral. *fn20" Greene deposition of October 26, 1981, p. 65.

 Additionally, the Bollinger Salaried Plan made certain loans to Bollinger. On October 11, 1971, Greene transferred $11,233.63 from the Bollinger Salaried Plan investment account to that plan's checking account. Greene and Allen then immediately wrote a check for $11,000 to Bollinger and took back an unsecured, demand note. The note, signed by Greene and Allen, called for 9 percent interest per annum on the principal amount. Joint Appendix, Joint Exhibit 4 (pp. 439-447).

 By 1973, Bollinger could not afford to make contributions to the Bollinger Salaried Plan. In January of 1973, Bollinger issued two checks, totalling $7,330.50, to the Bollinger Salaried Plan, and that plan simultaneously issued a check for $7,000 to Bollinger. Stipulation of Facts, para. 38. Greene called this a "wash transaction," which insured that the checks would cross at the bank and that neither would bounce. Greene further stated that this was, in essence, a loan transaction and that this loan transaction was preferable to a showing of "unpaid pension plan contributions on the books." Greene deposition of October 26, 1981, p. 106. In return for the loan, Greene and Allen signed a demand note, on behalf of Bollinger, which provided for 9 percent interest per annum. Joint Appendix, Joint Exhibit 43 (p. 459). It should be noted that this $7,000 loan took place while the original $11,000 amount was still outstanding and with no payment having been made, on either principal or interest, since the original loan of October 11, 1971. Joint Appendix, Joint Exhibit 45 (pp. 466-481).

 On November 8, 1973, Greene withdrew $8,700 more from the Bollinger Salaried Plan investment account and, on the same day, transferred that amount to Bollinger. In return for the loan, Greene and Allen signed an $8,700 demand note, which provided for 9 percent interest per annum. Joint Appendix, Joint Exhibit 42 (pp. 449-451).

 In August of 1974, a second "wash transaction" took place. That is, at that time, Bollinger again could not afford to make contributions to the Bollinger Salaried Plan. Greene deposition of October 26, 1981, pp. 104-106. Therefore, Bollinger issued a check to the Bollinger Salaried Plan in the amount of $8,531.50, and the plan simultaneously issued a check back to Bollinger in the amount of $8,500 and took back an unsecured demand note, signed by Greene and Allen, for that amount. Stipulation of Facts, para. 38.

 Bollinger was billed monthly for the interest due on the loans and that minimal payments were made. *fn21" However, as of the time of Bollinger's bankruptcy filing, in March of 1976, $35,288.99 remained outstanding, which figure includes the principal and balance of $27,850 and the interest balance of $7,438.99. *fn22" Joint Appendix, Joint Exhibit 45 (p. 519).

 Also, the Bollinger Union Plan loaned Bollinger $5,850 in November of 1973. In return, Bollinger gave an unsecured demand note back to the plan signed by Greene and Allen. As in all other cases, the note provided for 9 percent interest. Joint Appendix, Joint Exhibit 49 (pp. 536-542).

 Between February of 1973 and July of 1976, Bollinger was sent monthly bills on these loans by the Bollinger Union Plan Trust. Various payments were made, with all payments applied to principal. By the time of Bollinger's bankruptcy in March of 1976, there remained outstanding $17,220.75, which figure represents $13,100 in principal and $4,120.75 in interest. *fn23" Joint Appendix, Joint Exhibit 50 (p. 581).

 The Portersville Salaried Plan also made loans to Bollinger. In October and November of 1973, the Portersville Salaried Plan made two loans to Bollinger, totalling $3,750. *fn24" Once again, Bollinger gave back two unsecured demand notes, at 9 percent interest, signed by Greene and Allen, in exchange for the loans. Joint Appendix, Joint Exhibit 39 (pp. 393-403). As of March, 1976, *fn25" there remained $4,012.62 outstanding. Joint Appendix, Joint Exhibit 40 (p. 433).

 Finally, the Portersville Union Plan made loans to Kincaid. Between June of 1972 and September of 1972, the Portersville Union Plan loaned Kincaid $26,806.97. Joint Appendix, Joint Exhibit 37 (p. 382). Another loan was made, in January, 1973, for $3,193.03, and still another occurred in October of 1974, for $2,900. Joint Appendix, Joint Exhibit 37 (pp. 386-387). These loans total $32,900.

 The plaintiff's brief acknowledges that $2,100 was paid on these loans, with that entire payment going toward principal. This left a principal balance due of $30,800. The only evidence of interest due on this amount is a bill from the Portersville Union Plan Trust to Kincaid, indicating that $5,283 interest was due. Joint Appendix, Joint Exhibit 38 (p. 391). The total principal and interest outstanding is $36,083.

 The Court notes, at this point, that the total claimed outstanding on these loans is $170,780.36. It is now appropriate to review the applicable Pennsylvania law that governs these transactions.

 In Pennsylvania:

 
Every fiduciary is obligated, in managing the investment of trust assets, to exercise the care, skill, and judgment of an ordinarily prudent person unless it either has or procures its appointment by representing that it has greater skill, in which case it is obligated to exercise such greater skill.

 Estate of Stetson, 463 Pa. 64, 74-75 n. 4, 345 A.2d 679, 685 n. 4 (1975). See In re Estate of Killey, 457 Pa. 474, 477, 326 A.2d 372, 375 (1974). This "prudent man rule" is statutory law in Pennsylvania. Title 20 Pa.C.S.A. § 7302(b) provides in pertinent part as follows:

 This rule has been the law of Pennsylvania for some time ( In re Gillingham's Estate, 353 Pa. 493, 46 A.2d 269 (1946); In re Greenawalt's Estate, 48 Dauph. 222, aff'd, 343 Pa. 413, 21 A.2d 890 (1940); In re Brown's Estate, 287 Pa. 499, 135 A. 112 (1926)) and is intended to prevent transactions which offer a high potential for loss of plan assets and insider abuse. See In re Noonan's Estate, 361 Pa. 26, 30-31, 63 A.2d 80, 83 (1949). The fact that a prohibited investment or loan is or may be ultimately repaid does not render the loan lawful; its propriety must be judged at the time that the loan (investment) was made. In re Saeger's Estate, 340 Pa. 73, 75-76, 16 A.2d 19, 21 (1940).

 The plaintiff, who seeks to surcharge the trustee in this case, bears the burden of proving that the trustee breached an applicable fiduciary duty. Estate of Stetson, supra, 463 Pa. at 84, 345 A.2d at 690. Further, the plaintiff must establish that there is a causal connection between the breach of duty and the loss. Id. at 83, 345 A.2d at 690. However, once a beneficiary *fn26" has succeeded in proving a breach of duty and a loss flowing therefrom, the burden shifts to the charged trustee to establish that the loss would have occurred in the absence of a breach of duty. Id. at 83, 345 A.2d at 690. The Court emphasizes that as between an innocent beneficiary and a defaulting fiduciary (trustee), the fiduciary must bear the risk of uncertainty as a consequence of his breach of duty. Id.

 In this case, it is clear to the Court that defendants Greene and Allen breached their fiduciary duties as trustees. Remembering that a fiduciary is bound by the prudent man rule, the Court does not believe that a prudent man would invest all of his money in one type of investment, especially when companies in which the money was invested were having financial, and other types of, problems. See Stipulation of Facts, paras. 8 and 28. In essence, the Court does not believe that it is prudent to put "all of the eggs in one basket" because if that basket breaks, the eggs break with it. Rather, the Court believes that the prudent thing to do is to diversify investments so that the solvency of the trust fund is not dependent upon one investment or type of investment.

 The trustees' failure to diversify investments in this case proved to be especially detrimental. They continued to pour money into these companies. This was done to the point that the trust funds were almost completely dissipated. As of mid-1976, the Portersville Union Plan had only $89.49 in cash in its trust fund (Joint Appendix, Joint Exhibit 21 (p. 211a)); the Portersville Salaried Plan had only $15.77 in its trust fund (Affidavit of Michael Madron, Exhibit 1 (docket entry 46)); and the Bollinger Salaried Plan had no cash (Joint Appendix, Joint Exhibit 25 (p. 226)). These plans did hold notes receivable for the amounts outstanding, but the notes were received from companies that could not pay them. Moreover, all but one of the notes were unsecured. The Bollinger Union Plan did hold United States Treasury notes worth $17,000, but it also held notes receivable in excess of $18,000 from companies that could not pay them. Joint Appendix, Joint Exhibit 26 (p. 231). In sum, the plaintiff's brief correctly states that the trust funds were "ravaged."

 
A fiduciary entrusted with the interests of others cannot be allowed to make the business an object of interest to himself because from the frailty of nature, one who has the power, will be too readily seized with the inclination to use the opportunity for serving his own interest at the expense of others for whom he is entrusted.

 In re Noonan's Estate, supra, 361 Pa. at 31, 63 A.2d at 83. The test for forbidden self-dealing is "whether the fiduciary had a personal interest in the subject transaction of such a substantial nature that it might have affected his judgment in a material connection," and "the extent of a fiduciary's disqualifying interest for self-dealing is not 'did his interest affect his judgment,' but rather 'might his interest affect his judgment.'" Id. These tests are clearly met in this case in that the trustees had a substantial personal interest in the companies to which the loans were made that might have affected their judgment. The position of the trustees put them in the best position to recognize the volatile financial condition of the companies to which they were making loans; nevertheless, they made the loans in spite of this knowledge. It is apparent to the Court that the trustees were concerned with their own financial interests first, and the financial condition of the plans was of secondary concern. In other words, the trustees served their own interest at the expense of others for whom they were entrusted. Thus, the trustees not only violated the prudent man rule, but also the forbidden self-dealing rule.

 It may be argued that Greene was the primary violator here because he, alone, consistently signed the withdrawal and deposit slips. See, e.g., Joint Appendix, Joint Exhibits 41, 42, 43 (pp. 442, 449, and 456). However, when a co-trustee "hears of any fact tending to call his attention to the mismanagement or misapplication of trust funds by his co-trustee it is his duty to intervene . . . failure to do so would be a breach of trust imposing liability upon him for the loss." Adams Estate, 221 Pa. 77, 81, 70 A. 436 (1908). See also Herr v. United States Casualty Co., 347 Pa. 148, 150, 31 A.2d 533, 534 (1943). In light of the fact that Allen signed a check for a large amount from a plan to Bollinger (see Joint Appendix, Joint Exhibit 41 (p. 439)) and signed all unsecured demand notes for the loans, he should have at least been on notice of the improper investments, and his failure to intervene puts him on the same plateau with Greene.

 The defendants do not deny these loans; rather, they argue that the loans were prudent under the circumstances. As their brief states:

 
Although subsequent events have proven that these investments were not profitable, the trustees had no reason to suspect this at the time of the loans. The corporations were run by the Defendants and the Defendants believed the corporations would eventually be successful. They went so far as to invest their own personal funds in the corporations. In light of subsequent events, it is easy for Plaintiff to argue with hind-sight that the loans were unwise investments, but at the time they were made, these transactions were intended to benefit the Plans because absent such transactions the Plans may well have failed prior to the inception of the Pension Benefit Guaranty Corporation . . . and the employees would have been denied of any insurance on their own funds whatsoever.

 Defendants' Brief in Response to Motion for Summary Judgment, p. 7 (emphasis added).

 This argument holds no weight with the Court. Whether one looks at the transactions in foresight or hindsight, they are illegal because they violate the prudent man and forbidden self-dealing rules. Moreover, the Court does not believe that these transactions were intended to protect the plans; ...


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