UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA SANTA ANA DIVISION

Transcription

1 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 Joseph C. Faucher (SBN ) TRUCKER HUSS W. th Street, th Floor Telephone: () -0 Facsimile: () jfaucher@truckerhuss.com R. Bradford Huss (SBN 0) Dylan D. Rudolph (SBN 0) Timothy J. Rozelle (SBN ) TRUCKER HUSS One Embarcadero Center, th Floor San Francisco, California Telephone: () - Facsimile: () -0 bhuss@truckerhuss.com drudolph@truckerhuss.com trozelle@truckerhuss.com Attorneys for Plaintiff ST. JUDE HERITAGE MEDICAL GROUP, As Administrator of the St. Jude Heritage Medical Group Cash Balance Pension Plan St. Jude Heritage Medical Group, Administrator of the St. Jude Heritage Group Cash Balance Pension Plan vs. UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA Plaintiff, Integrated Wealth Management, Inc., a California Corporation, James M. Casey, Team Jupiter, LLC, a Delaware Limited Liability Company and DOES through 0, inclusive, Defendants. SANTA ANA DIVISION Case No. :-cv-00.v -- Case No. :-cv-00

2 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 THE PARTIES. Plaintiff St. Jude Heritage Medical Group, Inc. ( Plaintiff or SJHMG ) is a corporation organized and existing under the laws of the State of California, with its principal place of business in Anaheim, California. Plaintiff is the sponsor and administrator of the St. Jude Heritage Medical Group Cash Balance Pension Plan (the Cash Balance Plan or the Plan ). SJHMG brings this action in its representative capacity as administrator and fiduciary of the Plan, which is an employee pension benefit Plan within the meaning of U.S.C. 00()(A). The Plan is administered in the Central District of California.. Plaintiff is informed and believes and thereupon alleges that Defendant Integrated Wealth Management, Inc. ( IWM ) is a corporation organized and existing under the laws of the State of California, with its principal place of business in the City of Palm Desert, County of Riverside, California. At all times herein mentioned, IWM provided investment advisory services to and for the Plan in exchange for fees and other compensation. Moreover, as set forth in more detail below, IWM exercised authority or control over the assets of the Plan. As such, IWM was at all relevant times a fiduciary of the Plan within the meaning of ()(A)(i) and (ii) of the Employee Retirement Income Security Act of ( ERISA ) ( U.S.C. 00()(A)(i) and (ii)).. Plaintiff is informed and believes and thereupon alleges that Defendant James M. Casey ( Casey ) is and at all times herein mentioned was an individual residing in the City of Palm Desert, County of Riverside, State of California. Plaintiff is informed and believes that, at all times herein mentioned, Casey was the President and Chief Executive Officer of Defendant IWM, and was providing investment advisory services for a fee or other compensation to the Plan. Moreover, as set forth in more detail below, Casey exercised authority or control over the assets of the Plan. As such, Casey was at all relevant times a fiduciary of the Plan within the meaning of ()(A)(i) and (ii) of ERISA ( U.S.C. 00()(A)(i) and (ii))..v -- Case No. :-cv-00

3 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 IWM and Casey are sometimes referred to collectively in this Complaint as Defendants.. Plaintiff is informed and believes and thereupon alleges that Defendant Team Jupiter, LLC ( Team Jupiter ) is an inactive Delaware limited liability company with its principal place of business in Austin, Texas. Plaintiff is informed and believes and thereupon alleges that Casey is the managing member, or one of the managing members, of Team Jupiter. Plaintiff is further informed and believes and thereupon alleges that Team Jupiter is a party in interest with respect to the Cash Balance Plan within the meaning of () of ERISA ( U.S.C. 00().. Plaintiff is ignorant of the true names of the Defendants named herein as DOES through 0, inclusive, and hereby sues said Defendants by such fictitious names. Plaintiff will seek leave to amend this Complaint, if necessary, to identify such Defendants when their true identities are ascertained. JURISDICTION AND VENUE. This Court has jurisdiction over this matter under U.S.C., as the action arises under ERISA, U.S.C. 00 et seq.. Venue is proper in this District under U.S.C. (e)(), as the Plan is administered in this District. SUMMARY OF ALLEGATIONS. During the years at issue in this Complaint, IWM and Casey were fiduciaries with respect to the Plan, and therefore, owed the highest duties known in the law to the Plan and its participants. But instead of acting in the exclusive interests of the Plan, IWM and Casey surreptitiously carried out a series of self-dealing, deceptive acts designed to line their own pockets and to divert assets of the Plan to inappropriate, illiquid investments, and to an entity owned and controlled by Casey. In doing so, Casey and IWM breached their fiduciary duties of loyalty and prudence with respect to the Plan ( U.S.C. 0), and engaged in transactions prohibited by ERISA s prohibited transaction provisions ( U.S.C. 0)..v -- Case No. :-cv-00

4 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0. In one instance, Casey orchestrated the transfer of a total of Seven Million One Hundred Thousand Dollars ($,00,000) more than one-third of the Plan s total assets to an indexed annuity product issued by AXA Equitable Life Insurance Company (the Annuity ) without the knowledge of SJHMG. The Annuity was and is entirely unsuitable and imprudent for an ERISA-qualified retirement Plan, like the Cash Balance Plan. It imposes significant caps on any investment gains earned by the investment options offered within the Annuity product which caps would not be imposed on those same investments offered outside the Annuity and is therefore imprudent as a qualified retirement plan investment product. To make matters even worse, the issuer of the Annuity imposes a substantial surrender charge upon the withdrawal of Plan assets, making it essentially impossible for the Plan to either withdraw its assets from this obviously imprudent investment, or liquidate any part of the investment in order to make distributions to participants, without incurring a substantial penalty for doing so. That penalty does not begin to decline from its initial amount until the Annuity has been in place for at least four years. Plaintiff is also informed and believes and thereupon alleges that IWM/Casey received a commission from the issuer of the Annuity equal to at least five percent (%) of the $. million invested by the Plan, which Plaintiff is informed and believes is the reason that the Annuity s issuer imposes a substantial surrender charge in connection with the withdrawal of assets from the Annuity. IWM and Casey not only affirmatively concealed from Plaintiff the transfer of Plan assets to purchase the Annuity, they concealed their receipt of the commission and the corresponding surrender charge as well. Plaintiff never knowingly authorized the liquidation of Cash Balance Plan assets to purchase this Annuity, the imposition of a surrender charge, or the payment of a substantial commission to IWM/Casey. 0. Casey engaged in a second clandestine transfer of over $. million in Cash Balance Plan assets into a fraudulent real estate loan. As discussed in more detail below, Casey arranged for these assets to be transferred to a limited liability.v -- Case No. :-cv-00

5 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 company controlled by Casey. While Casey and IWM claim that this loan is evidenced by a promissory note secured by a mortgage or deed of trust on real property located in Dallas, Texas, the true facts are that the transaction is unsecured. A review of the public records relating to the real property that Casey represented to be the security for the loan reveals that no mortgage or deed of trust corresponding to any note in favor of the Plan has been recorded. None of the documents originally provided to Plaintiff with respect to this loan transaction divulged the identity of the purported borrower. When asked by a Plan service provider to divulge the name of the borrower, Casey identified the borrower only as Private investor, LLC. The true facts are that: () the property that purportedly secures the Plan s investment is owned by an LLC controlled by Casey; () neither Casey nor anyone else has ever recorded any document establishing a security interest in the property in favor of the Plan to secure this fraudulently procured loan ; () even if a security interest had been recorded in favor of the Plan in connection with the transaction, the property that purportedly serves as the security for the transaction is already encumbered by a senior deed of trust which Plaintiff is informed and believes secures an obligation in an amount that, together with the amount of the fraudulent loan from the Plan, significantly exceeds the value of the property, such that the loan from the Plan would be significantly undersecured in any event ; and () Casey has used the proceeds of the purported loan for his own benefit.. Even if this purported transaction had been a legitimate, appropriately secured investment (it was not), it would have been imprudent. The transfer of Plan assets to an illiquid real estate investment rendered those assets unavailable for distribution to eligible Plan participants and exposed the Plan s assets to a risk of total loss. Moreover, there are costs associated with such an investment (such as the need In an act of affirmative concealment, a trumped-up Offering Circular prepared by Casey to give the air of legitimacy to this transaction states that loans made pursuant to the Offering Circular would be secured by a senior mortgage or deed of trust..v -- Case No. :-cv-00

6 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 to obtain a valuation of the property allegedly securing the investment) that are not associated with the types of investments that are more traditionally suitable for employee benefit plans, such as stocks, bonds and mutual funds. And, investment of such a large amount into a single real estate investment constitutes a failure to diversify the assets of the Plan ( U.S.C. 0(a)()(C)).. In addition, the purported real estate investment at issue was prohibited by the provisions of ERISA ( U.S.C. 0). By the terms of the purported investment, the servicing agent of the transaction was Team Jupiter. Unbeknownst to Plaintiff at the time this transaction was fraudulently orchestrated by Casey, Team Jupiter is an inactive Delaware limited liability company. Casey is (or was, when the entity was active) Team Jupiter s managing member. Team Jupiter purported to charge a servicing fee with respect to the loan from the Cash Balance Plan to the borrower. And, based upon a review of the public records, Team Jupiter is also the owner of the real property that Casey represented to serve as security for the loan. IWM and Casey attempted to conceal the fact that Team Jupiter is actually the borrower in the transaction for well over a year. Thus, Casey (a Plan fiduciary) surreptitiously arranged for a transfer of Plan assets to Team Jupiter, an inactive Delaware LLC of which Casey was the managing member. Moreover, the purported loan to Team Jupiter was allegedly to be serviced in exchange for compensation by Team Jupiter, the borrower. As set forth in more detail below, the orchestration of this transaction by IWM and Casey was not only a breach of their fiduciary duties, but gave rise to multiple violations of ERISA s prohibited transaction provisions as well. GENERAL ALLEGATIONS. Casey and IWM provided investment advisory services to the Plan (and/or predecessor plan) in exchange for fees or other compensation since at least the mid-0s, until Plaintiff terminated their relationship with the Plan in 0. Consequently, at all relevant times, both Casey and IWM have been fiduciaries with.v -- Case No. :-cv-00

7 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 respect to the Plan within the meaning of ERISA ()(A) ( U.S.C. 00()(A)).. During the period of time that IWM and Casey provided investment advisory services to the Plan, Casey regularly attended quarterly meetings of Plaintiff s Board of Directors ( Board ). During those Board meetings, Casey addressed issues relating to the Plan and its investments. In addition to being a fiduciary to the Plan as a matter of law pursuant to ERISA, because of his longstanding relationship with Plaintiff and the Plan, Casey developed a relationship of trust and confidence with the Plaintiff s board, and in particular, with those members of Plaintiff s Board who were primarily responsible for overseeing the Plan.. Until his retirement at the end of 0, Michael Sugarman, M.D., was the Chairman of Plaintiff s Board of Directors, and took a leadership role on the Board of Directors in connection with the administration of the Plan. Dr. Sugarman developed a relationship of trust and confidence with Casey, who over the years had assumed increasing levels of responsibility regarding the Plan and its investments. As time went on, Casey s role with respect to the Plan evolved from one of primarily providing investment advisory services, to taking on the full panoply of fiduciary responsibilities associated with administering retirement plans.. Dr. Sugarman effectively retired from the practice of medicine in 0. Beginning in 0, James Benoit, M.D., assumed the role of Chairman of Plaintiff s Board of Directors. Because of his role as a member of the Board of Directors during that period when Dr. Sugarman had a leadership role relative to Plan administration, Dr. Benoit was well acquainted with Casey and IWM, and was aware of the significant amount of trust and confidence that Dr. Sugarman had placed in IWM and Casey with respect to the advice and counsel they provided regarding the Plan.. In 0, Casey continued appearing at Plaintiff s Board of Director meetings, and presented himself to Plaintiff s board members and others as the primary point of contact with the Plan s other service providers on behalf of the Plan..v -- Case No. :-cv-00

8 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 Plaintiff is informed and believes that Casey instructed other Plan service providers, including the Plan s auditors and administrators, not to interact directly with Plaintiff s board members, but rather, only to interact with him as the primary point of contact relative to the Plan on behalf of Plaintiff. THE FRAUDULENT TRANSFER OF CASH BALANCE PLAN ASSETS TO AN AXA ANNUITY PRODUCT. On or about April, 0, Casey attended a meeting of Plaintiff s Board of Directors. Prior to the beginning of the meeting, Casey presented to Dr. Benoit a large number of documents that he said needed to be signed by a Plan representative, and asked that Dr. Benoit sign those documents in the short period of time before the beginning of the meeting. Unbeknownst to Dr. Benoit, among those documents was an Application for a Variable and Index Linked Deferred Annuity issued by AXA Equitable Life Insurance Company.. On the day that he presented the AXA Annuity application to Dr. Benoit for signature, Casey never told Dr. Benoit what it was he was asking Dr. Benoit to sign. Moreover, Casey did not mention: () the possibility of investing Cash Balance Plan assets in any annuity product; () the numerous disadvantages of investing Cash Balance Plan assets in an indexed annuity product; () anything about changing the manner in which Cash Balance Plan assets were invested in general; () the compensation that Casey and IWM stood to receive if Cash Balance Plan assets were invested in the Annuity; or () that the documents that he was asking Dr. Benoit to sign might have an impact on how Plan assets were invested. 0. Prior to that time, any suggested changes to the manner in which Plan assets were invested and the reasons therefore were always expressly discussed at Plaintiff s Board of Director meetings. And, given the relationship of trust and confidence that had developed between Casey and the various Board members with whom Casey had interacted over a period of more than 0 years, neither Dr. Benoit nor any other member of Plaintiff s Board of Directors had any reason to believe that.v -- Case No. :-cv-00

9 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 Casey might fraudulently present documents for signature to Dr. Benoit or any other representative of the Plan s administrator that might impact the manner in which Cash Balance Plan assets were invested. Plaintiff certainly had no reason to believe that Casey would fraudulently obtain Dr. Benoit s signature on documents that would have the effect of transferring millions of dollars of Plan assets into investments that would have a detrimental effect on the Plan. Unfortunately, that is precisely what Casey did.. Plaintiff is informed and believes that, at or about the same time that Casey fraudulently obtained Dr. Benoit s signature on the Annuity application, he also fraudulently obtained Dr. Benoit s signature on documents enabling Casey to liquidate other Cash Balance Plan assets to be transferred to and invested in the Annuity. Between May, 0 and June, 0, Casey and IWM fraudulently, and without Plaintiff s knowledge, orchestrated the wire transfer of Seven Million One Hundred Thousand Dollars ($,00,000) of Cash Balance Plan assets to the AXA Annuity.. One feature of the AXA Annuity that renders it entirely unsuitable for a retirement plan such as the Cash Balance Plan is a surrender charge. If any assets are withdrawn from the Annuity within a certain number of years following the initial investment, a surrender charge will be imposed. The current surrender charge applicable to the Plan, which Plaintiff is informed and believes will apply through at least the year 0, is Three Hundred Fifty-Five Thousand Dollars ($,000).. Plaintiff is further informed and believes that, in connection with the transfer of Cash Balance Plan assets to the Annuity, IWM/Casey received a commission of at least five percent (%) of the assets invested in the Annuity, or Three Hundred Fifty-Five Thousand Dollars ($,000). Plaintiff is informed and believes that the above-mentioned surrender charge is imposed by AXA so that, in the event assets are withdrawn from the Annuity during the initial years of the investment, AXA is made whole with respect to the substantial commissions it paid.v -- Case No. :-cv-00

10 Case :-cv-00-jvs-jde Document Filed 0/0/ Page 0 of Page ID #:0 0 0 relative to the purchase of the Annuity. When IWM and Casey orchestrated the transfer of Cash Balance Plan assets to the Annuity without Plaintiff s knowledge, they also concealed from Plaintiff that () they would receive a substantial commission in connection with the purchase of the Annuity, and () AXA would impose a surrender charge in connection with any withdrawal of assets from the Annuity, which effectively rendered the investment illiquid and unsuitable for investment by the Cash Balance Plan.. The Annuity was an unsuitable investment for the Cash Balance Plan for yet another reason. The Annuity enabled investment of amounts contributed to the Annuity in one or more of several index investments. IWM and Casey directed investment of the Cash Balance Plan assets contributed to the Annuity into the following index investment options: (a) S&P 00 year; (b) MSCI EAFE year; (c) Russell 000 year; (d) Gold Index year; and (e) NASDAQ 00 year.. The Annuity product imposes substantial caps on the upside performance of the investment options that are available within it. For example, for one period of time, AXA imposed a performance cap rate of.0% on the S&P 00 year index investment. As a result, if the actual performance of the S&P 00 index fund exceeded.0%, the difference would not inure to the benefit of the Cash Balance Plan. Rather, it would inure to the benefit of AXA. In fact, the majority of the index options have outperformed the performance caps imposed by the Annuity since the time that Casey fraudulently transferred Plan assets to acquire the Annuity. Had the Plan invested in those same index options outside the Annuity, the performance caps imposed by the Annuity would not have applied and the Plan would have received a greater return on investments in such index based investments.. The substantial performance caps on the index investments within the Annuity, combined with its surrender charges, rendered the Annuity an entirely unsuitable and imprudent investment for the Plan..v -0- Case No. :-cv-00

11 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 THE FRAUDULENTLY PROCURED TEAM JUPITER LOAN. In addition to having fraudulently arranged for the transfer of Plan assets to an Annuity that Plaintiff never authorized, IWM and Casey arranged a second series of surreptitious transfers of Cash Balance Plan assets, this time in connection with a purported loan of Plan assets to an inactive limited liability company of which Casey is the managing member. As with the transfer of Plan assets to the Annuity, Casey manipulated this loan transaction by presenting documents to Dr. Benoit without his knowledge or understanding of what he was signing, and without ever telling Dr. Benoit that he was arranging to transfer Plan assets to an entity which he controlled.. Specifically, Plaintiff is informed and believes that Casey fraudulently presented documents for Dr. Benoit s signature which resulted in wire transfers of Cash Balance Plan assets in the amount of Three Hundred Fifty-Five Thousand Six Hundred Nineteen Dollars ($,), Four Hundred Fifty Thousand Dollars ($0,000), and Five Hundred Thousand Dollars ($00,000) of Cash Balance Plan assets), for a total transfer of One Million Three Hundred Five Thousand Six Hundred Nineteen Dollars ($,0,), to an entity known as Team Jupiter, LLC ( Team Jupiter ).. On or about the same date(s) that Casey fraudulently procured Dr. Benoit s signature on documents resulting in those wire transfers to Team Jupiter, Casey also fraudulently obtained Dr. Benoit s signature on a Subscription Agreement on behalf of the Plan with Team Jupiter (the Subscription Agreement ). The Subscription Agreement provided, generally, that the Plan was subscribing to a loan to an undisclosed borrower. 0. The Subscription Agreement referred, in turn, to a page Offering Circular which purportedly related to an offering of Fractional Loan Interests offered by Team Jupiter. This Offering Circular states in relevant part that Team Jupiter has arranged to make or purchase a loan (the Loan ) to a third party.v -- Case No. :-cv-00

12 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 borrower (the Borrower ) which Loan will be evidenced by a promissory note (the Secured Note ) that is secured by a first mortgage or deed of trust (the Security Instrument ) encumbering developed or undeveloped real property located within or outside California (the Security Property ). (Emphasis added.). Casey has also provided to Plaintiff an unsigned Loan Servicing and Equity Interest Agreement (the Loan Servicing Agreement ) with respect to a purported loan that was made or arranged by Team Jupiter in the amount of One Million Three Hundred Five Thousand Six Hundred Nineteen Dollars ($,0,) from the Cash Balance Plan. This Loan Servicing Agreement also stated that the loan was secured by promissory note executed by Borrower in favor of [Team Jupiter] and the initial Lenders and dated as of the date that the Loan is closed. The Loan Servicing Agreement further states that the purported promissory note would be secured by a deed of trust or a mortgage (the Security Document ) that will be recorded in the official records of Dallas County, Texas. Other documents provided by Casey indicate that the property which purportedly was to serve as security for this loan was located at 0- Jupiter Road in Dallas, Texas (the Subject Property ).. The Loan Servicing Agreement also states that the Servicer (Team Jupiter) would serve as the agent for the Lender (the Cash Balance Plan) with respect to the Loan, and that in exchange for acting as the loan servicer and agent for the Plan, would receive a monthly Loan Servicing Fee in the amount of /th of one percent of the unpaid principal amount outstanding at the end of each month for the term of the Loan. The Loan Servicing Agreement also provides that, in the event of a transfer of the property that purportedly secured the loan, Team Jupiter would receive, in consideration for the post-transfer services outlined in the Loan Servicing Agreement, a monthly management fee equal to the greater of % of the gross revenues actually received from the operations of the Property for any month following the transfer, or a monthly fee equal to /th of one percent of the unpaid.v -- Case No. :-cv-00

13 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 principal balance of the Loan as of the date of the Transfer of the property.. Notwithstanding the statements in these documents, however, Casey failed and refused, until recently, to ever provide to Plaintiff a copy of any promissory note evidencing a loan from the Cash Balance Plan. In or about September 0, in response to a request from a current Cash Balance Plan consultant asking for the identity of the borrower, Casey attempted to cover up the true identity of the entity that received the proceeds of the loan, and responded simply Private investor, LLC. However, in March 0, following repeated requests for a copy of a promissory note evidencing this alleged loan, Casey eventually produced a copy of a promissory note purporting to evidence a loan from the Cash Balance Plan to Team Jupiter, as the Maker of the note (i.e., the borrower).. Casey was also requested, before this Complaint was filed, to provide a recorded copy of any mortgage, deed of trust or any other security instrument relating to any real property and purporting to secure any promissory note reflecting an obligation owed to the Cash Balance Plan.. As of the date this Complaint is filed, no security instrument has been recorded in favor of the Cash Balance Plan relative to the Subject Property. However, in an obvious attempt to cover up the fact that no security instrument has ever been recorded to secure the purported loan to Team Jupiter from the Cash Balance Plan, Casey recently provided to Plaintiff s representatives a falsified document that he claimed to be a recorded deed of trust securing the promissory note evidencing the Team Jupiter loan. In fact, the recording number on the document provided by Casey corresponds to a document recorded in 0 (two years before the transfer of Cash Balance Plan assets to Team Jupiter actually occurred) which relates to an entirely different property than the Subject Property. (The actual recorded document does not even relate to a property owned by Team Jupiter.) Moreover, notwithstanding the statement in the Offering Circular that the loan from any lender (i.e., the Cash Balance Plan) would be secured by a first mortgage or deed of trust, a.v -- Case No. :-cv-00

14 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 first deed of trust with respect to the subject property securing a note in the principal amount of $00,000 in favor of Benchmark Bank was recorded on or about July, 00. That deed of trust was modified and extended pursuant to documents recorded on October, 0.. Plaintiff is informed and believes and thereupon alleges that the fair market value of the Subject Property is less than the amount of the fraudulently procured loan from the Cash Balance Plan to Team Jupiter. Consequently, Plaintiff is informed and believes that, even if the fraudulently procured loan from the Cash Balance Plan to Team Jupiter had in fact been secured by a mortgage or deed of trust encumbering the Subject Property (it has not), the value of the Subject Property would be inadequate, particularly in light of senior debt, to secure the loan from the Cash Balance Plan.. Moreover, Plaintiff never authorized any loan of Cash Balance Plan assets to Team Jupiter, or to any other undisclosed borrower. The purported loan, and the wire transfers of Cash Balance Plan documents, were procured fraudulently, and without any knowledge on the part of Plaintiff that the transaction was taking place. The transaction has resulted in a transfer of Plan assets to Team Jupiter, an inactive limited liability company of which Casey, a Cash Balance Plan fiduciary, is the managing member.. Adding insult to injury, pursuant to the Loan Servicing Agreement, Team Jupiter is allegedly entitled to receive loan servicing fees and other compensation in connection with a loan to itself.. Had Plaintiff been aware of any of the terms of the purported Team Jupiter loan transaction, it would not have authorized the transfer of Cash Balance Plan assets. /// /// ///.v -- Case No. :-cv-00

15 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 FIRST CLAIM FOR RELIEF (By Plaintiff Against IWM, Casey, and DOES through 0, inclusive, for Damages for Breach of Fiduciary Duty [ERISA 0(a)(), U.S.C. 0(a)()) Count One - For Damages to the Cash Balance Plan Resulting From the AXA Annuity Transaction - Breach of the Duty of Loyalty 0. Plaintiff repeats, realleges and incorporates by this reference paragraphs through, inclusive, of this paragraph as though fully set forth herein.. ERISA 0(a)()(A) ( U.S.C. 0(a)()(a)) provides that a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and for the exclusive purpose of (i) providing benefits to participants and their beneficiaries and (ii) defraying reasonable expenses of administering the plan.. As alleged in more detail above, the transfer of Cash Balance Plan assets to the Annuity product was fraudulently brought about by IWM and Casey for the purpose of providing unreasonable, excessive and undisclosed compensation to IWM and Casey. The transaction was in direct conflict with Defendants fiduciary duties to the Cash Balance Plan not only because it resulted in the aforementioned unreasonable, excessive and undisclosed compensation to Defendants, but because it did so at the expense of the Plan s participants and beneficiaries, particularly in light of the surrender charges that the Annuity would impose in the event Cash Balance Plan assets were withdrawn, and because of the significant performance caps that the Annuity placed on the index investments offered within it. Together, these features of the Annuity rendered it an entirely imprudent and unsuitable investment for the Cash Balance Plan, which IWM and Casey were aware of at the time they fraudulently transferred Cash Balance Plan assets to carry out the investment.. In surreptitiously arranging for the transfer of Cash Balance Plan assets to invest in the Annuity, subjecting the Cash Balance Plan to subpar investment.v -- Case No. :-cv-00

16 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 performance and significant surrender charges, and thereby procuring excessive, unreasonable and undisclosed compensation for their own account, IWM and Casey breached their fiduciary duty of loyalty to the Cash Balance Plan.. By virtue of these breaches of the fiduciary duty of loyalty, the Cash Balance Plan has been damaged in an amount to be shown according to proof, but in the amount of at least Seven Million One Hundred Thousand Dollars ($,00,000), plus interest thereon at the applicable legal rate. Count Two - For Damages to the Cash Balance Plan Resulting From the AXA Annuity Transaction - Breach of the Duty of Prudence. Plaintiff repeats, realleges and incorporates by this reference paragraphs through, inclusive, of this paragraph as though fully set forth herein.. ERISA 0(a)()(B) ( U.S.C. 0(a)()(B)) provides that a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.. As alleged above, IWM and Casey breached their fiduciary duty of prudence in surreptitiously arranging for Cash Balance Plan assets to be invested in the Annuity. The product was illiquid, carried surrender charges tied to excessive undisclosed commissions to be paid to IWM and Casey, and placed significant caps on the performance of the index funds within the Annuity. The Annuity s illiquidity consequently resulted in the Cash Balance Plan s assets being inadequately diversified. No prudent person acting in a like capacity and familiar with such matters would have advised the transfer of Cash Balance Plan assets to be invested in the Annuity product, much less fraudulently arrange for that transfer without Plaintiff s knowledge or consent..v -- Case No. :-cv-00

17 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0. IWM further breached its fiduciary duty to Plaintiff in consistently failing to adequately monitor the conduct of Casey in connection with the transfer of assets to the Annuity.. By virtue of these breaches of the fiduciary duty of prudence, the Cash Balance Plan has been damaged in an amount to be shown according to proof but in the amount of at least Seven Million One Hundred Thousand Dollars ($,00,000), plus interest thereon at the applicable legal rate. Count Three - For Breach of the Duty of Loyalty In Connection With The Team Jupiter Loan Transaction 0. Plaintiff repeats, realleges and incorporates by this reference paragraphs through, inclusive, of this paragraph as though fully set forth herein.. ERISA 0(a)()(A) ( U.S.C. 0(a)()(a)) provides that a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and for the exclusive purpose of (i) providing benefits to participants and their beneficiaries and (ii) defraying reasonable expenses of administering the plan.. In fraudulently procuring the transfer of Cash Balance Plan assets to Team Jupiter, IWM and Casey breached their fiduciary duty of loyalty to the Cash Balance Plan and its participants and beneficiaries.. The transfer of assets to Team Jupiter was done for the purpose of benefiting IWM and/or Casey, to the detriment of the Cash Balance Plan.. Plaintiff is informed and believes that Team Jupiter is an inactive Delaware limited liability company, and that Casey is (or was, when it was active) its managing member.. The so-called loan to Team Jupiter which was fraudulently procured by Casey without Plaintiff s knowledge is unsecured. Contrary to documents generated by Casey and/or Team Jupiter to give an air of legitimacy to the.v -- Case No. :-cv-00

18 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 transaction, a prior and senior deed of trust had been recorded relative to the Subject Property that Casey has indicated serves as the security for the loan. And, Plaintiff is informed and believes that, even if a security interest were to be recorded now in favor of the Cash Balance Plan relative to the Subject Property, the loan would be unsecured or at least undersecured, since the senior deed of trust on the Subject Property secures an obligation of Team Jupiter in the amount of $00,000, and Plaintiff is informed and believes that the value of the Subject Property is less than the amount of Cash Balance Plan assets (more than $. million) that Casey fraudulently transferred to Team Jupiter.. As a result of the breaches of fiduciary duty of loyalty by IWM and Casey in transferring Cash Balance Plan assets to Team Jupiter, the Cash Balance Plan has been damaged in an amount to be shown according to proof, but which amount is at least $,0,, with interest thereon. Count Four - For Breach of the Duty of Prudence In Connection With The Team Jupiter Loan Transaction. Plaintiff repeats, realleges and incorporates by this reference paragraphs through, inclusive, of this paragraph as though fully set forth herein.. ERISA 0(a)()(B) ( U.S.C. 0(a)()(B)) provides that a fiduciary shall discharge his duties with respect to a plan solely in the interest of the participants and beneficiaries and with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.. In fraudulently arranging for the transfer of Cash Balance Plan assets to Team Jupiter, IWM and Casey breached their fiduciary duty of prudence to the Cash Balance Plan and its participants and beneficiaries. 0. Plaintiff is informed and believes and thereupon alleges that Team.v -- Case No. :-cv-00

19 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 Jupiter is an inactive Delaware limited liability company. Consequently, Team Jupiter may not be authorized to conduct business, and therefore, may not be capable of repaying the Cash Balance Plan the amounts that Casey fraudulently transferred to it.. Because Casey was at all relevant times the managing member of Team Jupiter, he knew or at all times should have known that Team Jupiter did not have sufficient assets to repay the amounts that he fraudulently transferred from the Cash Balance Plan to Team Jupiter. Moreover, IWM and Casey knew or at all times should have known that the Subject Property that Casey represented to be the security for the Team Jupiter loan was encumbered by a senior deed of trust at the time he surreptitiously arranged for the transfer of Cash Balance Plan assets to Team Jupiter. Accordingly, IWM and Casey at all relevant times knew that, even if a deed of trust on the Subject Property was recorded in favor of the Cash Balance Plan, it would not provide sufficient security to the Cash Balance Plan for the amount of assets that Casey fraudulent transferred.. IWM and Casey further breached their fiduciary duties of prudence in arranging for the purported borrower in this fraudulent loan transaction Team Jupiter to simultaneously be the servicer of the loan, and to arrange for Team Jupiter to receive servicing fees and other compensation in connection with that loan.. IWM further breached its fiduciary duty to Plaintiff in consistently failing to adequately monitor the conduct of Casey in connection with the transfer of Plan assets to Team Jupiter.. As a result of the breaches of fiduciary duty of prudence by IWM and Casey in transferring Cash Balance Plan assets to Team Jupiter, the Cash Balance Plan has been damaged in an amount to be shown according to proof, but which amount is at least $,0,, with interest thereon at the applicable legal rate. /// ///.v -- Case No. :-cv-00

20 Case :-cv-00-jvs-jde Document Filed 0/0/ Page 0 of Page ID #:0 0 0 SECOND CLAIM FOR RELIEF (By Plaintiff Against Defendants IWM, Casey and DOES through 0, inclusive, for violation of ERISA s Prohibited Transaction Provisions) Count One - Violation of ERISA 0(b)() and () With Respect To The Transfer of Cash Balance Plan Assets to the AXA Annuity Product. Plaintiff repeats, realleges and incorporates by this reference paragraphs through, inclusive, of this paragraph as though fully set forth herein.. ERISA 0(b) ( U.S.C. 0(b)) provides, in relevant part, that [a] fiduciary with respect to a plan shall not - () deal with the assets of the plan in his own interest or for his own account, or * * * () receive any consideration for his own personal account from any party dealing with such plan in connection with a transaction involving the assets of the plan.. In fraudulently arranging for the transfer of Cash Balance Plan assets to purchase the Annuity, IWM and Casey, who were at all relevant times fiduciaries to the Cash Balance Plan, dealt with the assets of the plan in their own interest, and received consideration in the form of a commission that Plaintiff is informed and believes to have been at least five percent (%) of the amount of the assets transferred for their own accounts. In so doing, IWM and Casey violated both ERISA 0(b)() and 0(b)().. As a result of said prohibited transaction, IWM and Casey should be required to restore to the Cash Balance Plan the full amount of the assets transferred to the Annuity in the amount of Seven Million One Hundred Thousand Dollars ($,00,000), plus interest thereon from and after the date on which the prohibited transactions occurred.. In addition, IWM and Casey should be required to restore to the Cash.v -0- Case No. :-cv-00

21 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 Balance Plan the full amount of any wrongfully obtained compensation they received in connection with the transfer of Cash Balance Plan assets to acquire the Annuity, which Plaintiff is informed to be at least Three Hundred Fifty-Five Thousand Dollars ($,000), plus interest thereon from and after the date on which said compensation was received by them. Count Two - Violation of ERISA 0(b)() and () With Respect To The Transfer of Cash Balance Plan Assets to Team Jupiter 0. Plaintiff repeats, realleges and incorporates by this reference paragraphs through, inclusive, of this paragraph as though fully set forth herein.. In fraudulently arranging for the transfer of Cash Balance Plan assets to Team Jupiter, IWM and Casey, who were at all relevant times fiduciaries with respect to the Cash Balance Plan, dealt with the assets of the plan in their own interest, and received consideration from the assets of the Cash Balance Plan in the form of alleged servicing fees and other compensation provided for by the terms of the Subscription Agreement and the Offering Circular describing the purported loan transaction. In so doing, IWM and Casey violated ERISA 0(b)() and 0(b)().. As a result of said prohibited transactions, IWM and Casey should be required to restore to the Cash Balance Plan the full amount of the assets transferred to Team Jupiter, in an amount not less than One Million Three Hundred Five Six Hundred Nineteen Dollars ($,0,), with interest thereon from and after the date on which the transfers of Cash Balance Plan assets occurred.. As a further result of said prohibited transactions, IWM and Casey should be required to restore to the Cash Balance Plan the full amount of any compensation, in the form of servicing fees or any other compensation, that they received in connection with the purported loan of Cash Balance Plan assets to Team Jupiter, plus interest thereon at the applicable legal rate. ///.v -- Case No. :-cv-00

22 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 THIRD CLAIM FOR RELIEF (By Plaintiff Against Team Jupiter, LLC and DOES through 0, Inclusive, For Participation In A Transaction Prohibited By ERISA 0(b)() and 0(b)()). Plaintiff repeats, realleges and incorporates by this reference paragraphs through, inclusive, of this paragraph as though fully set forth herein.. Plaintiff is informed and believes and thereupon alleges that Team Jupiter is a party in interest with respect to the Cash Balance Plan pursuant to ERISA ()(B) and ()(G)(i) ( U.S.C. 00()(B) and 00 ()(G)(i)).. In participating in the so-called loan transaction pursuant to which IWM and Casey orchestrated the transfer of Cash Balance Plan assets to Team Jupiter, Team Jupiter knowingly participated in a transaction prohibited by ERISA 0(b)() and 0(b)() ( U.S.C. 0(b)() and (b)()).. Pursuant to ERISA 0(a)() ( U.S.C. (a)()), Team Jupiter should be required to disgorge any and all monies it received in connection with its participation in the so-called loan of Cash Balance Plan assets to Team Jupiter, including, without limitation, the proceeds of the so-called loan in the amount of One Million Three Hundred Five Thousand Six Hundred Nineteen Dollars ($,0,), any and all compensation in the form of loan servicing fees or other fees or compensation, and any and all interest or other earnings received on said amounts by Team Jupiter from and after its receipt of Cash Balance Plan Assets. FOURTH CLAIM FOR RELIEF (By Plaintiff Against IWM, Casey and DOES through 0, inclusive, For An Order Permanently Enjoining IWM, Casey and/or Team Jupiter, LLC From Acting As Fiduciaries To Or Providing Any Services to Employee Benefit Plans Governed By ERISA). Plaintiff repeats, realleges and incorporated herein by this reference paragraphs through, inclusive, of this Complaint as though fully alleged herein..v -- Case No. :-cv-00

23 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0. ERISA 0(a)() ( U.S.C. (a)()) provides that a participant, beneficiary or fiduciary may bring a civil action to (A) enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan. 0. As a result of the multiple breaches of fiduciary duty and prohibited transactions referred to above, Plaintiff seeks an order of this Court permanently enjoining IWM, Casey and DOES through 0, inclusive, from acting as fiduciaries for, or providing any services to, employee benefit plans governed by the ERISA. WHEREFORE, Plaintiff prays judgment against Defendants, and each of them, as follows:. On the First Claim For Relief: a. On Count One, for losses and damages in the amount of at least Seven Million One Hundred Thousand Dollars ($,00,000), plus pre-judgment and post-judgment interest at the maximum permissible rates, whether at law or in equity; b. On Count Two, for damages in the amount of at least Seven Million One Hundred Thousand Dollars ($,00,000), plus pre-judgment and postjudgment interest at the maximum permissible rates, whether at law or in equity; c. On Count Three, for damages in the amount of at least One Million Three Hundred Five Thousand Six Hundred Nineteen Dollars ($,0,), plus pre-judgment and post-judgment interest at the maximum permissible rates, whether at law or in equity; d. On Count Four, for damages in the amount of at least One Million Three Hundred Five Thousand Six Hundred Nineteen Dollars ($,0,), plus prejudgment and post-judgment interest at the maximum permissible rates, whether at law or in equity.. On the Second Claim for Relief: a. On Count One, for an order that Defendants restore to the Plan the.v -- Case No. :-cv-00

24 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 sum of at least Seven Million One Hundred Thousand Dollars ($,00,000), plus prejudgment and post-judgment interest at the maximum permissible rates, whether at law or in equity; b. On Count Two, for an order that Defendants restore to the Plan the sum of at least One Million Three Hundred Five Thousand Six Hundred Nineteen Dollars ($,0,), plus pre-judgment and post-judgment interest at the maximum permissible rates, whether at law or in equity.. On the Third Claim for Relief: for an order that Team Jupiter, LLC be required to disgorge any and all Cash Balance Plan assets that it received in connection with the purported loan transaction, any and all compensation of any kind that it has received in connection with said transaction, plus any and all interest or earnings received on said amounts from and after the date it received the Cash Balance Plan assets. On the Fourth Claim for Relief, for an order permanently barring Defendants, and each of them, from acting as a fiduciary for or providing any services for any employee benefit plan governed by ERISA.. On all claims for relief: a. For an award of Plaintiff s reasonable attorneys fees pursuant to ERISA 0(g) ( U.S.C. 0(g)); b. For costs of suit herein, and; c. For such other and further relief as the Court may deem just and proper. NOTICE PURSUANT TO ERISA 0(h) To ensure compliance with the requirements of ERISA 0(h), U.S.C. (h), the undersigned hereby affirms that, on this date, a true and correct copy /// ///.v -- Case No. :-cv-00

25 Case :-cv-00-jvs-jde Document Filed 0/0/ Page of Page ID #: 0 0 of this Complaint was served upon the Secretary of Labor and the Secretary of the Treasury by certified mail, return receipt requested. DATED: April 0, 0 By: TRUCKER HUSS, APC /s/ Joseph C. Faucher JOSEPH C. FAUCHER Attorneys for Plaintiff, St. Jude Heritage Medical Group, as Administrator of the St. Jude Heritage Medical Group Cash Balance Pension Plan.v -- Case No. :-cv-00