United States District Court, W.D. Pennsylvania
R. ALEXANDER ACOSTA, SECRETARY OF LABOR, UNITED STATES DEPARTMENT OF LABOR Plaintiffs,
WPN CORPORATION; RONALD LABOW; SEVERSTAL WHEELING, INC. RETIREMENT COMMITTEE; MICHAEL DICLEMENTE; DENNIS HALPIN; WHEELING CORRUGATING COMPANY RETIREMENT SECURITY PLAN; and SALARIED EMPLOYEES' PENSION PLAN OF SEVERSTAL WHEELING, INC., Defendants.
Barry Fischer, United States District Judge
the Secretary of Labor, U.S. Department of Labor
(“DOL”), brings this action under the Employee
Retirement Income Security Act of 1974, 29 U.S.C.
§§ 1001, et seq. (“ERISA”),
for Defendants' alleged failure to adequately discharge
their duties as fiduciaries of the Wheeling Corrugating
Company Retirement Security Plan and Salaried Employees'
Pension Plan of Severstal Wheeling, Inc. (the
“Plans”), resulting in the purported loss of
approximately $7 million. Presently before the Court is the
Motion to Disqualify Plaintiff's Expert Witness, Dr.
Susan Mangiero, (Docket No. 166), filed by Michael DiClemente
(“DiClemente”), Dennis Halpin
(“Halpin”), and the Severstal Wheeling, Inc.
Retirement Committee (“the Retirement Committee”)
Court has now reviewed the Motion, (Docket No. 166), the
Brief in Support of the Motion, (Docket No. 167),
Plaintiff's Brief in Opposition, (Docket No. 170), the
expert report of Dr. Susan Mangiero dated December 11, 2017
(Docket No. 167-2 (“Mangiero Report”)), the
expert rebuttal report of Dr. Susan Mangiero dated February
16, 2018, (Docket No. 167-3 (“Mangiero Rebuttal
Report”)), and the transcript of the deposition of Dr.
Susan Mangiero that took place on February 28, 2018, (Docket
No. 167-6 (“Mangiero Dep.”)). The Court heard
oral argument on the Motion and supplemental briefing at its
hearing on May 22, 2018, during which the Court heard
testimony from Dr. Susan Mangiero. (May 22, 2018 Hearing
Tr.). The motion is now ripe. After careful consideration of
the parties' positions, and for the following reasons,
Defendants' Motion is DENIED.
parties in this case do not dispute the underlying facts,
namely that the Retirement Committee oversaw assets held in
the Plans for the benefit of employees of Severstal Wheeling,
Inc. (and predecessors) and that Ronald Labow and WPN
Corporation (collectively, “Labow”) served as the
investment manager for those assets for many years with broad
discretion. (Docket No. 167 at 2-3). On November 3, 2008,
because the then-trustee of the WHX Trust would no longer
serve as trustee after 2008, the Plans' assets were
transferred by Labow to a standalone trust specific to
Severstal (the “Severstal Trust”). (Id.
at 3). The Retirement Committee instructed Labow to make this
transfer and accepted into the Severstal Trust an account
with Neuberger Berman as the majority of the Plans'
interest. (Id.; Docket No. 170 at 2 (approximately
97% of the value of the Neuberger Berman account was held in
eleven large cap energy stocks)). The Retirement Committee
knew the Plans' assets were going to be divested from the
WHX Trust, but did not follow up with Labow to confirm what
assets from the WHX Trust would be transferred into the
Severstal Trust or actively manage those assets once
deposited. (Id. at 3).
Retirement Committee did not formally engage the services of
Labow for the assets placed into the Severstal Trust until
December 5, 2008, when the previous Investment Management
Agreement with Labow was amended and backdated to November 1,
2008. (Docket Nos. 167-7 at ¶ 15, 148 at 3). During this
time, the Retirement Committee engaged Mercer Investment
Consultants to monitor and provide periodic portfolio reviews
of Labow. (Docket No. 167-7 at ¶ 16). Following a review
of the Plans' assets by Mercer, the Retirement Committee
learned on December 29, 2008 that the Plans' assets were
largely undiversified and immediately informed Labow.
(Id. at ¶ 18-19). Labow failed to take any
action until March 24, 2009, when the account was converted
to cash. (Docket No. 148 at ¶ 27-29). Labow continued to
take no action to invest the cash and, ultimately as a
result, the Committee terminated Labow's services on May
19, 2009. (Id.).
Second Amended Complaint, the DOL alleges that the Retirement
Committee and its members, DiClemente and Halpin, failed to
properly oversee the Plans and monitor Labow in breach of
their fiduciary duties and in violation of ERISA. (Docket No.
148 at ¶ 11). In the alternative, the DOL alleges that
the backdating of the IM Agreement was ineffective to relieve
Defendants from responsibility or liability for any
responsibility, obligation or duty they had to invest the
Plans' assets under ERISA. (Id. at ¶ 12).
To support their position, the DOL has designated Dr. Susan
Mangiero to provide an expert opinion regarding the
prevailing fiduciary standards in 2008 and 2009 for
retirement committee fiduciaries who monitor investment
managers for retirement plans, as well as the actual
monitoring of the Plans' investment managers, or lack
thereof, by the Retirement Committee in this case.
(See Mangiero Report; Mangiero Rebuttal Report).
Dr. Mangiero's Qualifications
Susan Mangiero is a forensic economist with extensive
professional training and industry experience in the
financial arena. (Mangiero Report at 4). She earned a Ph.D.
in finance from the University of Connecticut, a Master's
in Business Administration in finance from New York
University, a Master of Arts degree in economics from George
Washington University and a Bachelor of Arts degree in
economics from George Mason University. (Id.). Dr.
Mangiero is also an Accredited Investment Fiduciary
Analyst™, Chartered Financial Analyst®,
a Certified Financial Risk Manager, a FINRA Trained Neutral,
a Professional Plan Consultant™, a Certified Fraud
Examiner, and a member of the Association of Certified Fraud
Examiners Advisory Board. (Id.).
currently employed as a managing director with Fiduciary
Leadership, LLC, where she provides compliance, dispute and
litigation support to asset managers, banks, companies,
institutional investors and their counsel. (Id. at
48). Prior to working with Fiduciary Leadership, LLC, she
worked on multiple trading desks, including foreign exchange,
futures, options, swaps and other over-the-counter
derivatives, fixed income securities and money market
instruments. (Id.). Of particular note, Dr. Mangiero
is also affiliated with the Analysis Group, a group
co-founded and run by Defendants' retained expert, Dr.
Bruce E. Stangle.
Mangiero also has significant experience leading numerous
ERISA-focused training programs for and with retirement plan
fiduciaries, advisors and regulators, including the U.S.
Department of Labor. (Id. at 6). She speaks and
writes frequently on topics including risk management, asset
manager and investment consultant due diligence, monitoring
of asset managers, and ERISA investment best practices.
(Id.). She has also offered expert testimony and
forensic investigations in connection with various
arbitration, mediation, litigation and industry advisory
proceedings and has over twenty years of experience in
capital markets, global treasury, asset-liability management,
portfolio management, economic and investment analysis,
derivatives, financial risk control and valuation.
(Id.). At this point in the litigation, Dr. Mangiero
has produced one expert report dated December 11, 2017, an
expert rebuttal report dated February 16, 2018, testified in
a deposition on February 28, 2018, and testified in Court on
May 22, 2018.
Dr. Mangiero's Opinions
has proffered Dr. Mangiero as an expert witness to assist the
fact finder in understanding the prevailing standard for the
Retirement Committee fiduciaries monitoring their investment
manager, Mr. Labow, and determining whether or not they met
the standard that was required of them under ERISA. (Mangiero
Report at 3-4). In her expert report, Dr. Mangiero explains
that the “prevailing fiduciary standard in 2008 and
2009 required ERISA committee members to carry out multiple
tasks on behalf of plan participants” and, to the
extent “committee members chose to delegate some of its
responsibilities to outside parties, the prevailing fiduciary
standard required ERISA committee members to adequately
monitor those parties.” (Mangiero Report at ¶ 41).
Where, as here, the employer appoints an investment manager,
“the employer is responsible for the selection of the
manager” and is “required to monitor the manager
periodically to assure that it is handling the plan's
investments prudently and in accordance with the
appointment.” (Id. (citing Meeting Your
Fiduciary Responsibilities, ” U.S. Dept. of Labor, Feb.
2012)). Dr. Mangiero opines that the Retirement Committee had
a duty to “carefully monitor” Labow, (Mangiero
Report at ¶ 40(a), (b)), and that it “did not do
as much as [it] could have and should have” done,
(Mangiero Rebuttal Report at ¶ 6). She explains that
“[c]areful monitoring by ERISA fiduciaries is always
important but especially during a period when major changes
to a plan must be completed. . . . This transfer [to the