The opinion of the court was delivered by: Jones, J.
Before the Court is certain Defendants' Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(1) and 12(b)(6) and Plaintiff's Opposition thereto (Doc. No. 78). For the following reasons, the Motion to Dismiss will be denied.
I. Background and Relevant Procedural History
Plaintiff's Filing of the Complaint and the Koresko Defendants' Initial Responses On March 6, 2009, Plaintiff filed suit against several defendants claiming violations of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001, et seq. Among those defendants are John J. Koresko, V; Jeanne Bonney; Penn-Mont Benefit Services, Inc.; Koresko & Associates, P.C.; Koresko Law Firm, P.C.; Penn Public Trust; Regional Employers Assurance Leagues Voluntary Employees' Beneficiary Association Trust; and Single Employer Welfare Benefit Plan Trust (collectively, "the Koresko Defendants"). Plaintiff alleges that the Koresko Defendants violated ERISA by breaching their fiduciary duties to over 100 benefit plans known as the Regional Employers Assurance Leagues Voluntary Employees' Beneficiary Association ("the REAL VEBA") and Single Employer Welfare Benefit Plan ("the SEWBP") (jointly, "the Plans) by directing Community Trust Company ("CTC"), which was then Trustee of both Plans' Trusts ("the Trusts"), to pay over one million dollars of Trust assets to the Koresko Defendants and other entities who were not entitled to receive those assets.*fn1
On March 12, 2009, the Koresko Defendants filed an Emergency Motion to Place Case Under Seal and for Other Equitable Relief and an Emergency Motion for Temporary Restraining Order and Other Preliminary and Permanent Injunctive Relief. After argument and additional briefing, on March 26, 2009, the Court denied the Koresko Defendants' Emergency Motions. On April 14, 2009, the court denied reconsideration of its March 26, 2009, Order. An appeal of the latter ruling is pending.
The allegations below are taken from the Complaint except where otherwise noted. During the period of January 1, 2000, to the present, Penn-Mont Benefit Services, Inc. ("Penn-Mont") sold prototype welfare plans to numerous companies and persons throughout the United States. (Compl. ¶¶ 3, 7, 17.)*fn2 Employers purchased the product and used the prototype Plan to establish death benefit and/or welfare benefit plans for their businesses. (Compl. ¶ 17, 20.) Penn-Mont, whose President is Koresko and which has no employees, was the Plan Administrator for each Plan. (Compl. ¶¶ 9, 18.) Penn-Mont (Compl. ¶ 18.) Penn-Mont's Plan Administrator duties were performed by Koresko's law firms, Koresko & Associates, P.C. ("KAPC") and Koresko Law Firm, P.C. ("KLF"). (Compl. ¶ 18.) Bonney, an attorney employed by KAPC and KLF, was responsible for the operations of plan administration, including issuance of directions to the Plans' Trustee. (Compl. ¶ 18.) Koresko was attorney and sole shareholder of KAPC and president of KLF. (Compl. ¶ 9.)
The Plans' assets were originally held in the REAL VEBA Trust or predecessor trusts. (Compl. ¶ 21.) In late 2004 or early 2005, the bank accounts of the REAL VEBA Trust were closed and the Plans' assets were transferred from the REAL VEBA Trust to the SEP Trust. (Compl. ¶ 21.)
Each plan funded death benefits by purchasing from an insurance company insurance on the lives of individual participants. (Compl. ¶ 22.) The Plan documents promised the participant's beneficiary a certain sum to be paid upon the death of the participant. (Compl. ¶ 23.) After being notified of a participant's death, an insurance company paid the Trust the value of the policy issued on the life of that participant. (Compl. ¶ 24.) Penn-Mont directed CTC to transfer the insurance proceeds out of the Trust account to "death benefit accounts." Only Koresko and Bonney, who were not Trustees of the Plans' Trusts, had authority over the death benefit accounts. (Compl. ¶ 24.)
In regard to at least three of the Plans, the designated beneficiaries did not receive the full amount required by the terms of the Plans upon the death of the participants. (Compl. ¶¶ 25-28.) Rather, Penn-Mont gave the beneficiary an option either to receive the full amount of the death benefit in ten annual payments, without interest, or to accept a lump sum considerably less than the full amount of the death benefit and the insurance proceeds. (Compl. ¶¶ 25-28.) In two instances, the beneficiaries chose the lump sum. (Compl. ¶¶ 25-27.) Defendants Koresko and/or Bonney paid the lump sum, made a small payment to the Internal Revenue Service, and then transferred the balance of the insurance proceeds -- over $200,000 and almost $500,000, respectively -- and out of the death benefit accounts to the accounts of KAPC, KLF and/or the accounts of a participant in an unrelated Plan. (Compl. ¶¶ 25-27.) In a third instance, the insurance proceeds were transferred to a separate trust account, controlled exclusively by Bonney and Koresko, and no benefits have been paid to the beneficiary of the deceased participant. (Compl. ¶ 28.) This third instance is the subject of a pending lawsuit before this Court, Civ. No. 03-6903. (Compl. ¶ 28.)
2. Income Paid out of the Trust to the Koresko
Defendants Employers forwarded contributions to the Trusts for the purposes of paying premiums on the insurance policies. (Compl. ¶ 29.) On a daily basis, monies were swept from the Trust account and deposited in investments until needed to pay premiums. (Compl. ¶ 29.) The interest income was taken out of the Trusts and deposited into a bank account belonging to Penn Public Trust ("PPT") and controlled by Koresko. (Compl. ¶ 30. See also Defs.' Mem. 4 (stating that Koresko formed PPT).) In particular, during the period of April 2002 through December 2004, Penn-Mont directed CTC on a monthly basis to transfer all the interest to a bank account belonging to PPT, despite that the Trust Agreements state that all income and/or earnings of the Trusts belong solely to the Trusts. (Compl. ¶ 30.) During the same time period, Kroesko controlled the money in and wrote checks on this PPT account. (Compl. ¶ 30.) He did not return the interest income to the Trust. (Compl. ¶ 30.)
3. Other Transfers Out of the Trust to the Koresko
Defendants On a regular basis, Penn-Mont directed CTC to transfer varying sums of money from Plan Trusts to Penn-Mont, KAPC, KLF, and PPT. (Compl. ¶ 33.) Some of these transfers were characterized as administrative fees owed to Penn-Mont. (Compl. ¶ 34.) However, Penn-Mont charged its fees to the employers, not to the Trusts. (Compl. ¶ 34.) Penn-Mont set its own fees, which were not approved by an independent fiduciary, and directed that the fees be paid with Plan assets. (Compl. ¶ 34.) Koresko regularly moved money between Penn-Mont, KAPC, KLF, and PPT accounts, and did not return Plan assets to the Trusts. (Compl. ¶ 35.)
Some of the insurance companies from which the Plans bought policies insuring the lives of the individual participants were mutual companies that demutualized and became stock companies. (Compl. ¶ 36.) Upon demutualization, these insurance companies issued stock to some of the Plans and thereafter paid dividends on this stock to the shareholder Plans. (Compl. ¶ 36.) Penn-Mont never credited the ...