UNITED STATES DISTRICT COURT DISTRICT OF CONNECTICUT U.S. TELEMANAGEMENT, INC., : DOCKET NO. RONALD SCHEIBEL, individually and on behalf of the

UNITED STATES DISTRICT COURT

DISTRICT OF CONNECTICUT

U.S. TELEMANAGEMENT, INC.,

:

DOCKET NO.

RONALD SCHEIBEL, individually

and on behalf of the U.S.

:

Telemanagement Inc. Defined

Benefit Plan and the U.S.

:

Telemanagement Inc. Welfare Benefit

Trust, S. KENESTON AND

:

ASSOCIATES, INC., and SCOTT

KENESTON, individually and

:

on behalf of the S. Keneston Defined

Benefit Plan,

:

Plaintiffs,

:

v.

:

FIDELITY SECURITY LIFE

:

JULY 31, 2012

INSURANCE CO., CJA ASSOCIATES,

INC., FIRST ACTUARIAL

:

CORPORATION and THOMAS

THORNDIKE,

:

Defendants. :

Class Action Complaint

I.

Summary.

1.

This is a class action brought by two small businesses that established

employee benefit plans and two plan participants in those plans. They sue under §§ 502

(a)(2) and (a)(3) of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C.

§§ 1132 (a)(2) and (a)(3), against the fiduciaries who gave them investment advice and

administered these plans.

Case 3:12-cv-01110 Document 1 Filed 08/01/12 Page 1 of 36

2.

Defendant Fidelity Security Life Insurance Company (FSL) through its

agents defendants CJA Associates, Inc. (CJA) and Thomas Thorndike

(Thorndike)(collectively Defendants) used a pre-packaged program designed and

administered by CJA and defendant First Actuarial Corporation (FAC) to induce the

Plaintiffs and other similarly situated businesses to establish employee benefit programs

and invest plan trust assets in FSL annuities. Pre-packaged recommendations prepared

by CJA and delivered by Thorndike promised the Plaintiffs and others that investing

plan trust assets in these annuities would yield large tax breaks for the businesses and

secure large retirement benefits for plan participants.

3.

But FSL, CJA and Thorndike knew or should have known that the

investments they were recommending were wholly unsuitable. (The cost far exceeded

any potential benefits they conferred). (All three Defendants knew that there were

equally effective less expensive options the Plaintiffs could have chosen and they should

have recommended)

4.

First, the exorbitant commissions and fees FSL was paying agents—up to

95% of the first year’s contributions and excessive percentages thereafter—meant that

the product was a completely unreasonable investment when compared to other annuity

products readily available in the marketplace that achieved the same goals. Second, the

Defendants knew or should have known that the plans’ claims for favorable tax

treatment were dubious and would jeopardize the unusually large deductions CJA and

Thorndike had touted to lure small businesses into the investment. Third, the Plans’

participants have at various points had little or no accrued benefits under IRC §430

because nearly all the plan asserts were converted into commissions and fees, subjecting

the Plans to retroactive disqualification by the IRS.

5.

The net result of these twin problems left those who agreed to make these

investments paying far too much to get far too little.

6.

Now, having lost most of their investments to commissions and with

Plaintiff Scheibel having his deductions for plan contributions disallowed by the IRS,

the companies and principal plan participants sue Thorndike individually. They sue

CJA, FAC, and FSL individually and on behalf of others who took the same bad advice.

They seek to recover the plans’ losses, their attorneys’ fees, their costs and for other

equitable relief for breaching their fiduciary and other ERISA duties.

II. Jurisdiction and Venue.

7.

This Court has subject matter jurisdiction over this action under 28 U.S.C.

§ 1331 and ERISA §502 (e)(1), 29 U.S.C. § 1132 (e)(1).

8.

This Court has personal jurisdiction over the Defendants under ERISA

§502 (e)(2), 29 U.S.C. § 1132 (e)(2). All of the Defendants are either residents of the

United States or subject to service in the United States and this Court therefore has

personal jurisdiction over them.

9.

Venue is proper in this district under ERISA § 502 (e)(2), 29 U.S.C. § 1132

(e)(2), because some or all of the fiduciary breaches for which relief is sought occurred

in this district and the Defendants reside or may be found in this district. Venue is also

proper in this district under 28 U.S.C. § 1391 because the Defendants systematically

and continuously do business in this district and because a substantial part of the events

giving rise to the claims occurred within this district.

III. Plaintiffs.

10.

The Plaintiff, U.S. Telemanagement, Inc. (UST) is a small Connecticut

corporation with its principal place of business in Stratford, Connecticut. It established

the U.S. Telemanagement, Inc. Defined Benefit Plan and the U.S. Telemanagement, Inc.

Welfare Benefit Trust (collectively the UST Plans). The UST Plans are ERISA plans

under ERISA §3, 29 U.S.C. § 1002 because they are employer provided plans providing

welfare and pension benefits to employees. UST is a fiduciary of the UST Plans as defined

in ERISA §3 (21), 29 U.S.C. §1002 (21) because it exercises discretion and control over

the UST Plan. UST brings this lawsuit individually and on behalf of all similarly situated

purchasers of the FSL § 412 (e)(3) annuities under §§ 502 (a)(2) and (a)(3) of ERISA, 29

U.S.C. §§ 1132 (a)(2) and (a)(3).

11.

The Plaintiff Ronald Scheibel is a resident of Shelton, Connecticut. He is

the president of UST and a participant in and trustee of the UST Plans. As a trustee of

the UST Plans he is a fiduciary of the UST Plans as defined in ERISA §3(21), 29 U.S.C. §

1002 (21) because he exercises discretion and control over the UST Plans. Scheibel

brings this lawsuit individually on behalf of the UST Plans under §§502 (a)(2) and (a)(3)

of the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§1132 (a)(2)

and (a)(3), and on behalf of all similarly situated participants in plans that purchased

FSL §412 (e)(3) annuities under a similar CJA plan.

12.

The Plaintiff, S. Keneston and Associates, Inc. (SKA) is a small

Connecticut corporation with its principal place of business in Bantam, Connecticut.

SKA established the S. Keneston and Associates, Inc. Defined Benefit Plan (the SKA

Plan). The SKA Plan is an ERISA plan under ERISA §3, 29 U.S.C. § 1002 because it is an

employer provided plan providing pension benefits to employees as defined in ERISA § 3

(21). SKA is a fiduciary of the SKA Plan under 29 U.S.C. § 1002 (21) because it exercises

discretion and control over the SKA Plan. SKA brings this lawsuit individually and on

behalf of all similarly situated participants in plans that purchased FSL § 412 (e)(3)

annuities under a similar CJA plan under §§ 502 (a)(2) and (a)(3) of ERISA, 29 U.S.C.

§§ 1132 (a)(2) and (a)(3). This complaint will collectively refer to the SKA Plan and the

UST Plan as the “Plans.”

13.

The Plaintiff Scott Keneston is a resident of Bantam, Connecticut. He is

the president of SKA and a participant in and trustee of the SKA Plan. As a trustee of the

SKA Plan he is a fiduciary of the SKA Plan as defined in ERISA § 3 (21), 29 U.S.C. § 1002

(21) because he exercises discretion and control over the SKA Plan. Keneston brings

this lawsuit individually on behalf of the SKA Plan under §§502 (a)(2) and (a)(3) of the

Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. §§ 1132 (a)(2) and

(a)(3), and on behalf of all similarly situated participants in plans purchasing FSL §412

(e)(3) annuities under a similar CJA plan.

IV. Defendants.

14.

FSL is an insurance company headquartered in Kansas City, Missouri. At

all times relevant here, FSL was a fiduciary of the SKA Plan and the UST Plan as defined

in ERISA § 3 (21), 29 U.S.C. § 1002 (21) because directly and through its agents, it

exercised discretion and control over the Plans’ assets and, through its agents, offered

investment advice for a fee with respect to moneys of the Plans.

15.

CJA is a Delaware corporation headquartered in Chicago, Illinois. It is a

registered agent of FSL with the Connecticut Insurance Department. At all times

relevant here CJA was a fiduciary of the SKA Plan and the UST Plan as defined in ERISA

§ 3 (21), 29 U.S.C. § 1002 (21) because it exercised discretion and control over the

disposition of the Plans’ assets, offered investment advice for a fee with respect to

moneys or other property of the Plans, and had discretionary authority and

responsibility in the administration of the Plans.

16.

First Actuarial Corporation of Illinois is wholly owned and controlled by

CJA. At all times relevant here, FAC was a fiduciary of the SKA Plans and the UST Plans

as defined in ERISA § 3 (21), 29 U.S.C. 1002 (21) had discretionary authority and

responsibility in the administration of the Plans and had discretional control respecting

management of the Plans as the Plans’ sponsor.

17.

Thomas Thorndike is a resident of Milford, Connecticut. Thorndike is a

registered agent of FSL with the Connecticut Insurance Department. At all times

relevant here, Thorndike was a fiduciary of the SKA Plan and the UST Plan as defined in

ERISA § 3 (21), 29 U.S.C. § 1002 (21) because he offered investment advice for a fee with

respect to moneys or other property of the Plans.

V.

Facts.

A.

FSL, CJA and Thorndike led Plaintiffs into an investment trap.

18.

At all times relevant to this complaint, one of FSL’s products was an

annuity designed to be used to fund retirement benefits paid through employer-

sponsored retirement Plans. FSL describes this annuity as a Group Deposit Annuity

Administration Contract. Under the contract language, money is accumulated to fund

post-retirement benefits to employees on a tax-deductible basis for employers. The

annuity contributions accumulate over a specific funding period to provide plan benefits

to eligible participants.

19.

FSL sold this product through appointed agents who would recommend

this annuity product to employers establishing pension benefit plans known as “Section

412 (e)(3) Plans” after the Internal Revenue Code section which allows pension plans

funded by insurance products to qualify for favorable tax treatment. FSL named the

agreement under which it sold this annuity product a “Section 412 (i) annuity” after the

former Code section that permitted them. For the sake of clarity, this complaint will

refer to the product as a “Section 412 (e)(3) annuity” for the current Code section that

permits them.

20.

Section 412 (e)(3) plans are attractive to small business owners seeking

large tax deductions. Unlike with defined contribution plans like 401 (k) plans, the

maximum tax deductible contribution to a defined benefit plan is limited only by the

size of the contribution necessary to fund a Code-approved future pension benefit

promised by the plan. If the contributions are invested in high yielding investments,

then contributions can be correspondingly lower. If the contributions are invested in

low yielding investments, then contributions must be correspondingly higher—yielding

higher deductions. Annuities, as compared with stocks and other investments, are low

yielding investments and therefore require larger cash contributions when they fund

benefits. Pension annuities are held in the general accounts of the insurance company

where the industry standard is to pay 5-6% total to the general agent and agent and

remove nothing from the participant’s account. Commissions are typically amortized

over the life of the investment or taken from the investment returns. In the instant

egregious case, FSL immediately took 95% of the first year’s contributions and used it to

pay agents.

21.

FSL exercised authority and control over the agents who recommended

these annuities to pension plans including the UST Plan and the SKA Plan by, among

other things, developing and directing the use of its §412(e)(3) product for their use, by

coordinating and directing the promotion of the annuities including the promotion of

pre-packaged §412 (e)(3) plans offered by its agent CJA and by making the large cash

contributions inherent in Section 412 (e)(3) plans extraordinarily attractive for the

agents that sell FSL annuities. FSL offered its agents enormous front-loaded

payments—up to 95% of employers’ substantial first year contributions and large

percentages thereafter— to convince benefit plan investors to buy §412 (e)(3) annuities,

thus giving agents extraordinary incentives to find small business owners desiring large

immediate large deductions and convince them to invest in §412 (e)(3) annuities.

22.

FSL called these payments “loads.” FSL explained these charges in a

December 16, 2011 letter to SKA’s lawyer, John J. Carangelo:

The costs incurred in providing the Contract (which includes marketing

expenses and commissions) are paid substantially at the beginning of the

Contract’s Funding Period. These costs are paid by deducting a

corresponding amount from the annuity deposits made by the plan. The

amount deducted from the annuity deposits is [sic] for such costs is

referred to in the insurance industry as the Contract’s load. The Contract’s

load depends upon the Funding Period selected by the plan. The load is

higher for longer Funding Periods and lower for shorter Funding Periods.

In addition, because the Contract’s load is substantially paid at the

beginning of the Funding Period, the load decreases significantly in

subsequent years. This means that, as additional deposits are made to the

Contract, a larger percentage of each annual deposit is applied to the

Contract’s accumulation account. Furthermore, the Contract’s

accumulation account grows through a guaranteed compounding interest

rate of three (3) percent.

23.

No matter how it is explained, under FSL’s schedule, the loads make the

annuities inherently unsuitable investments for pension funds because they yield too

little benefit at too great of a cost relative to other investment options, including annuity

purchases where commissions almost never reduce the amount invested but are instead

amortized over the life of the investment and where maximum commissions generally

do not exceed 5-6%%. FSL knew or should have known this. At the same time the Plans

invested in the FSL §412 (e)(3) annuities, research shows that companies such as

MassMutual Financial Group and American National Insurance Company were offering

comparable yielding annuities with no upfront loads or fees and total commissions built

into the structure of the product within the industry standard of 5-6%.

24.

As structured, the FSL §412 (e)(3) annuities are also inherently unsuitable

to fund pension plan benefits because the employer’s contributions under the plans are

excessive in relation to the actual cost of the claimed plan benefits, placing their status

as ordinary and necessary business expenses and thus tax deductibility in doubt under

Section 162 (a) of the IRC. This can be confirmed by the fact that the IRS has disallowed

deductions for these plans including the deduction taken by the Plaintiff Scheibel for

UST’s contributions.

25.

FSL knew or should have known of this twin-unsuitability yet it set its

agents in motion to recommend its §412 (e)(3) annuities to the pension plans of small

businesses by establishing the annuity product and by granting them enormous

financial incentives that it knew or should have known would spark extraordinary

efforts to persuade pension plans and their sponsors to purchase this product even

though it was unsuitable in comparison with products readily available in the

marketplace. Further, once it had the Plans’ assets in its hands FSL allowed the

unreasonable loads to be paid from those assets when it knew or should have known the

payments were unreasonable. First, because it directly held and controlled the Plans’

assets prior to them being placed in FSL annuities, FSL acted and is liable as a fiduciary.

FSL is directly liable as a fiduciary for its misconduct in paying the load amounts.

Second, because its agents were fiduciaries, FSL was also a fiduciary. Third, as a

principal, FSL is also responsible for the fiduciary misconduct of its agents under

general agency law even if FSL is not a fiduciary. Fourth, FSL knew its agents were

fiduciaries and is responsible for knowingly and actively participating in any breaches of

fiduciary duty they committed even if FSL is not a fiduciary.

26.

The Plaintiffs are small businesses without the internal resources to make

the many intricate decisions needed to establish, administer and invest in employee

benefit plans on their own. Perforce, they must place themselves in the hands of experts

in the field. The Plaintiffs did not and could not negotiate with the Defendants at arms’

length. They had to operate on trust. Section 412 (e)(3) plans are complicated attempts

to provide employee benefits while maximizing tax benefits. FSL possessed skill and

knowledge regarding annuity investments to support these complex plans that was

superior to the knowledge of any of the Plaintiffs. FSL boasts that its clients can count

on it and its “Midwestern values” to ensure “adroit handling” of their business

opportunities and “flexible and responsive” approaches designed for their needs.

1

The

Plaintiffs relied to their detriment on FSL’s superior knowledge and skill when they

chose to invest the Plans’ assets in FSL’s §412 (e)(3) annuities.

B.

CJA Associates.

27.

CJA and Associates is a registered agent of FSL with the Connecticut

Department of Insurance and other states. It did what it is alleged to have done here

within the scope of its duties as an FSL agent to further its own business but equally to

help sell for FSL the §412 (e)(3) annuities that were at the center of its §412 (e)(3)

business.

28.

CJA developed a product that is at the center of this lawsuit—a pre-

packaged program to recommend, establish, and administer §412 (e)(3) annuity

investments to small businesses creating employee benefit plans. The package includes

a master employee benefit plan document that it sponsors through a company it created

for this purpose, the Defendant, FAC.

29.

At all times relevant to this complaint, by agreement with sponsoring

employers including SKA and UST and with the Plans, CJA, directly and sometimes

through FAC and Thorndike provided regular investment advice to §412 (e)(3) plans

including the SKA Plans and the UST Plans. In return, CJA and FAC charged the Plans

thousands of dollars in annual fees and other payments. This advice included

recommending initial investments in FSL annuities, the continued maintenance of FSL

annuities as the Plans’ principal investment and the regular purchase of additional FSL

annuities in individualized amounts it judged appropriate after analyzing the income of

each of the Plans’ participants, their expected retirement dates and the contributions

needed to fund the level of benefit it recommended to the Plans. This advice was the

primary basis for decisions to be made by plan sponsors, including SKA and UST. The

documents presented to plan sponsors including SKA and UST were presented only for

pro forma approval to companies including SKA and UST and did not include options,

call for any specific deliberations or seek anything other than for SKA, UST and other

sponsors to simply sign documents and return them. The Plaintiffs in this case were

directed what to do by CJA and FAC and did what they were told.

30.

CJA advised the SKA Plan and the UST Plan to make their initial

investments in the FSL § 412 (e)(3) annuity in a series of presentations and other

documents in 2008 and 2009.

31.

The most important early CJA document is the document it called a

Pension Plan Illustration. This proposal formed the basis for a plan’s decision to invest

in FSL § 412 (e)(3) annuities, including the Plans here. The document records its direct

link with FSL by stating in the top right hand corner of each page “412 (e)(3) Plan,

Annuity: Optima FSL.” It repeatedly touts that it permits employers to “design a

retirement plan while enjoying large immediate income tax deductions.” It says nothing

about the impact on the suitability of the investment caused by the fact that 95% of the

most immediate of those large or as it says elsewhere “very large” immediate

contributions end up immediately in the hands of those selling the FSL annuities and

are not amortized over the life of the investments or taken in whole or part from FSL’s

investment income. Indeed, this document never uses the word “load” or “commission.”

It discloses fees but gives no such label to the important ones. Under a section called

“Fees” it discloses: “IRS filing fee $300.00 and Administration Fees $2,500.00.”

Because it proposes plan goals and the means to achieve them this document formed the

reference point for investment decisions before, during and after the establishment of

CJA’s pre-packaged § 412 (e)(3) plans, including the Plans at issue here.

32.

None of CJA’s §412 (e)(3) standard documents disclose that CJA is an

agent for FSL.

33.

None of the CJA standard documents used to recommend investment in

FSL §412 (e)(3) annuities directly, honestly, and adequately explain that the loads

charged: (1) immediately reduce the investment rather than being amortized over the

life of the investment or taken in whole or in part from FSL investment income from the

plans’ assets, and (2) wipe out the value of many of the deductions taken for

contributions and provide an overall value significantly below that of alternative

available investment vehicles in the marketplace.

34.

CJA’s standard documents never explained that available in the

marketplace were other annuity products and other investments that offer similar

benefits at far lower costs and with far more certain status as tax deductible vehicles for

pension plan investments.

35.

CJA advised the Plans to invest in FSL §412 (e)(3) annuities when it knew

or should have known that the investments were unsuitable: (1) because the loads

charged and the manner in which they were charged were excessive and improper when

compared to other investments available in the marketplace, and (2) because—as

explained above—the contributions under the Plans as structured were questionable as

ordinary and necessary business expenses and thus their tax deductibility in doubt.

36.

In addition to advising the investments in FSL annuities, CJA and FAC

also bore exclusive responsibility for the ongoing discretionary administration of the

plans, including the UST Plan and the SKA Plan. CJA plan administration documents

were pre-packaged and were presented to plan trustees for signature. FAC was the plan

sponsor of the Plans and retained the right to amend the Plans at any time and was

responsible under the Plans’ terms for using those amendments to ensure the Plans’

compliance with the law. FAC prepared the Plans’ annual reports and was aware of the

impact the loads were having on the Plans. Discretion and control of the Plans was de

facto wholly the responsibility of CJA and FAC with other nominal plan officials merely

signing off on what they were instructed to sign by CJA and FAC on documents ranging

from those making investment decisions, right down to the minutes of UST and SKA

board meetings authorizing the actions directed by CJA and FAC. CJA and FAC’s work

in administering the Plans included directing plan contributions levels, calculating

benefits, preparing Form 5500 filings to the IRS, amending the Plans to conform to

changes in the Internal Revenue Code and preparing the Plans’ annual reports. CJA and

FAC advised the Plaintiffs to adopt plan documents and amendments and that failed to

comply with the IRC, endangering the tax qualified status of the Plans.

37.

As the Plan Sponsor and the fiduciary responsible for the Plans’

compliance with the law as well as the preparation of their annual reports FAC should

have warned the other fiduciaries of the Plans of the negative impact the investments

were having on the Plans and their tax status and recommended that the Plans’ cease

investing in the FSL §412 (e)(3) annuities and disinvest the money that had been

previously placed in them.

38.

The Plaintiffs are small businesses without the internal resources to make

the many intricate decisions needed to establish, administer and invest in employee

benefit plans on their own. Perforce, they must place themselves in the hands of experts

in the field. The Plaintiffs did not and could not negotiate with the Defendants at arms’

length. They had to operate on trust. Section 412 (e)(3) plans are complicated attempts

to provide employee benefits while maximizing tax benefits. CJA and FAC possessed

skill and knowledge regarding the operation, investments, and administration of these

complex plans that was superior to the knowledge of any of the Plaintiffs. CJA touts

itself as “specializing” in “the design and marketing of innovative insurance products

and employee benefit plans for the small business and estate planning market.” CJA

boasts of “over thirty years of experience working with leading insurance companies”

and that “our actuarial, marketing, legal and administrative experts help our partners

become more successful with complex employee benefit programs.”

2

CJA promises its

clients that it will “take the worry out of retirement planning.”

3

The Plaintiffs relied to

their detriment on CJA and FAC’s superior knowledge and skill in choosing the Plans’

investments, their structure and their ongoing administration.

C.

Thomas Thorndike.

39.

Defendant Thomas Thorndike is registered with the State of Connecticut

Insurance Department as an agent of FSL. Thorndike did what he is alleged to have

done here within the scope of his duties as FSL’s agent to help sell for FSL the §412

(e)(3) annuities and to reap the enormous commissions offered for early plan

contributions.

40.

Thorndike was a tax and investment advisor to both UST and SKA. By

agreement with these companies he provided regular tax and investment advice to UST,

SKA and the Plans for a fee for several years.

41.

Thorndike betrayed the trust reposed in him by UST and SKA by

delivering them into the hands of CJA and FSL in exchange for enormous commissions,

including initial fees FSL paid him of 95% of plan contributions from UST and SKA.

42.

Thorndike was a mouthpiece for CJA and FSL, frequently delivering and

reinforcing CJA recommendations about §412 (e)(3) products and the wisdom of

investing in FSL annuities.

43.

Thorndike, acting for CJA and FSL, advised UST and SKA to use CJA’s

§412 (e)(3) Plan product to invest their pension trust funds in FSL’s §412 (e)(3)

annuities at a series of meetings held in 2008 and 2009 even though Thorndike knew or

should have known that these investments were wholly unsuitable for the UST and SKA

Plans.

44.

Thorndike knew but did not disclose that:

a) CJA is an agent for FSL.

b) the impact of the load on the deductions derived or the benefits earned

even though the commissions wipe out the value of the deductions for

many of the years of the contract.

c) the marketplace provides annuity products and other investments that

offer equivalent benefits at far lower costs and with far more certain

status as tax deductible vehicles for pension Plans investments.

45.

After the initial investment was made, Thorndike continued to advise the

UST and SKA Plans to retain their investments in the FSL annuities, to make additional

investments and follow CJA’s instructions and advice on this topic and plan

administration. He never disclosed that the investments were unsuitable when

compared with available and less costly alternatives even though additional investments

had to be made and the Plans could have pulled their money out and reinvested it more

reasonably elsewhere. When UST and SKA became skeptical of the Plans, Thorndike

repeatedly advised them that CJA knew what it was doing and that the Plans were sound

investments even though Thorndike knew or should have known that they were nothing

of the sort and that his real interest in the transactions was to reap the enormous bounty

FSL was offering anyone who could bring it § 412 (e)(3) annuity business.

46.

The Plaintiffs are small businesses without the internal resources to make

the many intricate decisions needed to establish, administer and invest in employee

benefit plans on their own. Perforce, they must place themselves in the hands of experts

in the field. The Plaintiffs did not and could not negotiate with the Defendants at arms’

length. They had to operate on trust. Section 412 (e)(3) plans are complicated attempts

to provide employee benefits while maximizing tax benefits. Thorndike possessed skill

and knowledge regarding annuity investments to support these complex plans that was

superior to the knowledge of any of the Plaintiffs. Thorndike holds himself out as an

expert “Financial Consultant & Investments”, “taxes” and “insurance.”

4

The Plaintiffs

relied to their detriment on Thorndike’s superior knowledge and skill when they chose

to invest the Plans’ assets in FSL’s §412 (e)(3) annuities.

47.

On March 17, 2011 a federal grand jury returned an indictment charging

Thorndike with 15 counts of aiding and assisting the preparation of a false federal

income tax return and one count of obstruction of the administration of the Internal

Revenue laws.

48.

As a consequence of the collective wrongdoing of the Defendants as

described above, the UST Plans, the SKA Plans and other similarly situated Plans

imprudently and repeatedly invested the Plans’ plan trust money in the FSL §412 (e)(3)

annuities.

49.

As of the plan year ending December 28, 2009 UST had contributed

$201,482.49 to the defined benefit plan portion of the UST Plan with $191,408.36

having been taken for “loads,” leaving just $10,074.13 in the plan’s account. The

contributions were paid to FSL, and CJA and Thorndike profited from the loads and

additional administrative fees CJA charged the Plans. In light of industry standards

these loads were clearly excessive.

50.

The IRS has disallowed the deduction taken for this contribution on the

ground that the employer’s contributions under the plans are excessive in relation to the

actual cost of the claimed plan benefits.

51.

As of the plan year ending December 1, 2009, UST had contributed

$200,000 to the retiree medical portion of the UST Plan with $57,999.99 of that

amount having been taken for “loads,” leaving $142,000.01 in the plan’s account. The

contributions were paid to FSL, and CJA and Thorndike profited from the loads and

additional administrative fees CJA charged the Plans. In light of industry standards

these loads were clearly excessive.

52.

The IRS has disallowed the deduction taken for this contribution on the

ground that the employer’s contributions under the plans are excessive in relation to the

actual cost of the claimed plan benefits.

53.

As of the plan year ending December 31, 2011 Keneston and Assoc. had

contributed $350,000 to the defined benefit plan with $253,000.00 having been taken

for loads, leaving just $97,000 in the plan’s account. The contributions were paid to

FSL, and CJA and Thorndike profited from the loads and additional administrative fees

CJA charged the Plans. In light of industry standards these loads were clearly excessive.

VI. The Relevant Law.

54.

ERISA §§ 404 (a)(1)(A) and (B), 29 U.S.C. §§ 1104 (a)(1)(A) and (B),

provides, in pertinent part, that a fiduciary “shall discharge his duties with respect to a

plan solely in the interest of the participants and beneficiaries, for the exclusive

purpose of providing benefits to participants and their beneficiaries, with the care, skill,

prudence, and diligence under the circumstances then prevailing that a prudent person

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.”

55.

The fiduciary duties under ERISA §§ 404 (a)(1)(A) and (B) are often

described as the duties of loyalty, exclusive purpose and prudence and, in Donovan v.

Bierwirth in 1982 the Second Circuit described these duties as the "highest known to the

law."

5

They include among other things, the following duties:

(a) to independently and thoroughly investigate and continually monitor

the merits of all the investment alternatives of a plan to ensure that

each investment is a suitable option for the plan;

(b) to avoid conflicts of interest and to resolve them promptly when they

occur. Fiduciaries must always administer a plan with an "eye single"

to the interests of the participants and beneficiaries, regardless of the

interests of the fiduciaries themselves or the plan sponsor; and

(c) to disclose and inform, including the duty to correct prior information

that fiduciaries know or should know to have been untruthful,

incomplete when made or which is superseded by subsequent events.

56.

ERISA § 405 (a), 29 U.S.C. § 1105 (a), "Liability for Breach by Co-

Fiduciary," provides, in pertinent part,

5

680 F.2d 263, 272 n.8 (2d Cir. 1982).

In addition to any liability which he may have under any other provision of

this part, a fiduciary with respect to a plan shall be liable for a breach of

fiduciary responsibility of another fiduciary with respect to the same plan

in the following circumstances:

1) if he participates knowingly in, or knowingly undertakes to conceal, an

act or omission of such other fiduciary, knowing such act or omission is

a breach;

2) if, by his failure to comply with § 404 (a)(1), 29 U.S.C.§ 1104 (a)(1), in

the administration of his specific responsibilities which give rise to his

status as a fiduciary, he has enabled such other fiduciary to commit a

breach; or

3) if he has knowledge of a breach by such other fiduciary, unless he

makes reasonable efforts under the circumstances to remedy the

breach.

57.

ERISA contemplates that fiduciary functions might become so

compartmentalized that fiduciaries may argue that their narrow responsibilities absolve

them of any overall obligation to the best interest of plans and their participants. As the

legislative history reveals, the law imposing co-fiduciary liability requires fiduciaries to

protect plans and their participants from the mistakes and misdeeds of other fiduciaries.

[I]f a fiduciary knows that another fiduciary of the plan has committed a

breach, and the first fiduciary knows that this is a breach, the first

fiduciary must take reasonable steps under the circumstances to remedy

the breach. . . . [T]he most appropriate steps in the circumstances may be

to notify the plan sponsor of the breach, or to proceed to an appropriate

Federal court for instructions, or bring the matter to the attention of the

Secretary of Labor. The proper remedy is to be determined by the facts

and circumstances of the particular case, and it may be affected by the

relationship of the fiduciary to the plan and to the co-fiduciary, the duties

and responsibilities of the fiduciary in question, and the nature of the

breach.

6

6

1974 U.S.C.C.A.N. 5038.

58.

ERISA § 3 (14), 29 U.S.C. § 1002 (14) defines a "party in interest" to an

employee benefit plan as: (A) any fiduciary (including, but not limited to, any

administrator, officer, trustee, or custodian), counsel, or employee of such employee

benefit plan; (B) a person providing services to such plan; (C) an employer any of whose

employees are covered by such plan; and (D) an employee organization any of whose

members are covered by such plan.

59.

ERISA § 406, 29 U.S.C. § 1106, prohibits certain transactions between

Plans and parties in interest. Specifically, ERISA § 406 (a)(1), 29 U.S.C. § 1106 (a)(1),

provides:

A fiduciary with respect to a plan shall not cause the plan to engage in a

transaction, if he knows or should know that such transaction constitutes a

direct or indirect-

(a) sale or exchange, or leasing, of any property between the plan and a

party in interest;

(b) lending of money or other extension of credit between the plan and a

party in interest;

(c) furnishing of goods, services, or facilities between the plan and a party

in interest;

(d) transfer to, or use by or for the benefit of a party in interest, of any

assets of the plan; or

(e) acquisition, on behalf of the plan, of any employer security or employer

real property in violation of section 1107 (a) of this title.

60.

ERISA § 502(a)(2), 29 U.S.C. § 1132(a)(2), provides that a civil action may

be brought by a fiduciary or participant for relief under ERISA § 409, 29 U.S.C. § 1109.

61.

ERISA § 409 (a), 29 U.S.C. § 1109 (a), "Liability for Breach of Fiduciary

Duty," provides, in pertinent part:

any person who is a fiduciary with respect to a plan who breaches any of

the responsibilities, obligations, or duties imposed upon fiduciaries by this

subchapter shall be personally liable to make good to such plan any losses

to the plan resulting from each such breach, and to restore to such plan

any profits of such fiduciary which have been made through use of assets

of the plan by the fiduciary, and shall be subject to such other equitable or

remedial relief as the court may deem appropriate, including removal of

such fiduciary.

62.

ERISA § 502 (a)(3), 29 U.S.C. § 1132 (a)(3), authorizes individual

participants to seek equitable relief from Defendants, including, without limitation,

injunctive relief, contract reformation, constructive trust, restitution, surcharge or other

monetary relief.

63.

Plaintiffs therefore bring this action under the authority of ERISA § 502

(a)(2) for relief under ERISA § 409 (a) to recover losses sustained by the Plans arising

out of the breaches of fiduciary duties by the Defendants for violations under ERISA §

404 (a)(1) and ERISA § 405 (a), as well as, under ERISA § 502 (a)(3), 29 U.S.C. § 1132

(a)(3), for equitable relief from Defendants, including, without limitation, injunctive

relief, contract reformation, constructive trust, restitution, surcharge or other monetary

relief.

VII. Count I: Breach of fiduciary duty against all Defendants.

64.

The Plaintiffs incorporate in this count all allegations made elsewhere in

this complaint.

65.

As described in this complaint, the Defendants knew or should have

known that the FSL § 412 (e)(3) annuities were imprudent investments and had they

properly discharged their fiduciary obligations, they would have known that the FSL §

412 (e)(3) annuities were imprudent investments for annuity-funded pension plans

because there are more reasonably priced, equally effective investment options available

in the marketplace. Defendants could and should have advised investments with lower

fees and expenses and less tax risk that provide comparable or better performance than

the FSL § 412 (e)(3) annuities. After the initial investment, they should have advised

against investing additional sums from the Plans’ assets in the FSL § 412 (e)(3)

annuities and withdrawal from the FSL § 412 (e)(3) annuities entirely.

66.

Defendants knew or should have known that less expensive, comparable

and superior funds were available in the marketplace, but failed to communicate this

information to participants. Instead, they repeatedly recommended the high cost FSL

§412 (e)(3) annuities that caused the Plans to squander vast sums on unnecessary fees

and to court IRS disqualification of the Plans.

67.

Presumably, Defendants, as plan fiduciaries, are familiar with United

States Department of Labor guidance on the prudent selection of investment options.

The DOL urges employers and fiduciaries to take their duty of selecting investment

options for a retirement plan, including evaluating the fees that various funds charge,

very seriously, as part of their fiduciary responsibilities:

Why Consider Fees?

Plan fees and expenses are important considerations for all types of

retirement plans. As a plan fiduciary, you have an obligation under ERISA

to prudently select and monitor plan investments, investment options

made available to the plan's participants and beneficiaries, and the

persons providing services to your plans. Understanding and evaluating

plans fees and expenses associated with plan investments, investment

options, and services are an important part of a fiduciary's responsibility.

This responsibility is ongoing. After careful evaluation during the initial

selection, you will want to monitor plan fees and expenses to determine

whether they continue to be reasonable in light of the services provided.

Case 3:12-cv-01110 Document 1 Filed 08/01/12 Page 25 of 36

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Page 26

26

In recent years, there has been a dramatic increase in the number of

investment options, as well as level and types of services, offered to and by

plans in which participants have individual accounts. In determining the

number of investment options and the level and type of services for your

plans, it is important to understand the fees and expenses for the services

you decide to offer. The cumulative effect of fees and expenses on

retirement savings can be substantial.

7

68.

The Defendants’ acts and omissions were material to the UST and SKA

Plans’ ability to prudently invest plan assets. The acts and omissions prevented the

Plans from making informed decisions regarding the investment of the Plans’ assets.

69.

The Defendants' acts, omissions, and incomplete disclosures alleged in

this complaint affected all those plans funded with FSL §412 (e)(3) annuities because

the investment recommendations and the disclosure documents were uniform and pre-

packaged.

70.

By engaging in the conduct alleged in this complaint, the Defendants

breached their duties of prudence and loyalty in violation of ERISA § 404 (a)(1)(A),

including by:

a) by repeatedly recommending that the Plaintiffs invest or retain pension

trust money in unsuitable investments;

b) by failing to clearly, accurately and completely disclose suitable

alternative investment options;

c) by failing to clearly, accurately and completely disclose the impact of

the loads charged on the suitability of the investments recommended.

71.

As a direct and proximate result of the breaches of fiduciary duties alleged

herein, the UST Plans, the SKA Plans and the other plans that bought FSL § 412 (e)(3)

annuities have lost large sums from their plan assets.

7

Understanding Retirement Plan Fees and Expenses, U.S. Department of Labor, May 24, 2004

(available at http://www.dol.gov/ebsa/publications/undrstndgrtmnt.html).

72.

As provided under ERISA §§ 409, 502 (a)(2) and (a)(3), 29 U.S.C. §§ 1109

(a), 1132 (a)(2) and (a)(3), the Defendants are liable to restore the losses to the Plans

caused by their breaches of fiduciary duties alleged in this Count and to provide other

equitable relief as appropriate.

VIII.Count II: Breach of co-fiduciary liability against all

Defendants.

73.

The Plaintiffs incorporate in this count all allegations made elsewhere in

this complaint.

74.

As alleged above, ERISA § 405 (a), 29 U.S.C. § 11o5 (a), imposes liability

on a fiduciary, in addition to any liability which he may have under any other provision,

for a breach of fiduciary responsibility of another fiduciary with respect to the same plan

if he or she knows of such a breach and fails to remedy it, knowingly participates in a

breach, or enables a breach. The Defendants breached all three provisions.

75.

Each Defendant knew of the breaches by the other fiduciaries and made

no effort, much less reasonable ones, to remedy those breaches. Each Defendant knew

that the FSL §412 (e)(3) annuity investments were unsuitable because of the

unreasonable loads involved and the questionable tax status of the investments but

made no effort to disclose or remedy the breach.

76.

Each Defendant knowingly participated in the breach. FSL participated by

making the unsuitable investment vehicle for the express purpose of offering it to

persons like and including the Plaintiffs. CJA participated by making the § 412 (e)(3)

Plans designed to be funded by the FSL § 412 (e)(3) annuity and by repeatedly

recommending it as a suitable investment to the Plaintiffs. FAC participated by

remaining silent even though it knew about the loads and their impact on the Plans’

assets. Thorndike participated by advising the Plaintiffs to make the repeated

investment of plan assets in the unsuitable FSL §412 (e)(3) annuities.

77.

Each Defendant enabled the others to breach their fiduciary duties. FSL

set up the scheme to sell annuities by creating the §412 (e)(3) annuities, setting up CJA

and Thorndike as its agents, and motivating them with extraordinarily high

commissions for placing the product. CJA helped FSL carry out the scheme to push the

unsuitable annuities on pension plans by designing its §412 (e)(3) plans and providing

them to Thorndike along with materials to convince plans to invest in them. FAC

enabled the other breaches by remaining silent even though it knew about the loads and

their impact on the Plans’ assets. Thorndike was the mouthpiece of the other two

Defendants. He pressed the products into the Plaintiffs’ hands using his credibility with

the Plaintiffs and by passing on the investment promotional material CJA gave him.

78.

By engaging in the conduct alleged in this complaint, the Defendants failed

in their duties as co-fiduciaries to prevent breaches by other fiduciaries of their duties of

prudent and loyal management, complete and accurate communications and adequate

monitoring in violation of ERISA §405 (a).

79.

Under ERISA §§ 409 and 502 (a)(2) and (a)(3), 29 U.S.C. §§ 1109 (a) and

1132 (a)(2) and (a)(3), Defendants are liable to restore the losses to the Plans caused by

their breaches of fiduciary duties alleged in this Count and to provide other equitable

relief as appropriate.

IX. Count III: Non-fiduciary liability for knowing participation

in a breach.

80.

The Plaintiffs incorporate in this count all allegations made elsewhere in

this complaint.

81.

As the Supreme Court recognized in Harris Trust & Sav. Bank v. Salomon

Smith Barney, Inc.

8

the ERISA statute does not limit who may be a defendant in a

breach of fiduciary duty lawsuit. Non-fiduciaries may be liable for knowing

participation in a breach of fiduciary duty. Each of the Defendants in this lawsuit would

be equally liable for knowing participation in a breach of fiduciary duty if it were not

itself a fiduciary so long as at least one of the other Defendants was a fiduciary.

82.

Each Defendant knew of the breaches by the other fiduciaries and actively

participated in the breach. Each Defendant knew that the FSL § 412 (e)(3) annuity

investments were intended for a pension plan trust and were unsuitable because of the

unreasonable loads involved and the questionable tax status of the investments. FSL

participated by making the unsuitable investment vehicle for the express purpose of

offering it to persons like and including the Plaintiffs. CJA participated by making the §

412 (e)(3) plans designed to be funded by the FSL § 412 (e)(3) annuity and by repeatedly

recommending it as a suitable investment to the Plaintiffs. FAC participated by

remaining silent even though it knew about the loads and their impact on the Plans’

assets. Thorndike participated by advising the Plaintiffs to make the repeated

investment of the Plans’ assets in the unsuitable FSL § 412 (e)(3) annuities.

83.

Accordingly, in addition to their other liability each Defendant has non-

fiduciary liability for relief under ERISA § 502 (a)(3), 29 U.S.C. § 1132 (a)(3) for

equitable relief in the form of an injunction, an accounting, disgorgement of profit,

restitution or other equitable relief .

8

530 U.S. 238 (2000).

X.

Count IV: Liability for a prohibited transaction against all

Defendants.

84.

The Plaintiffs incorporate in this count all allegations made elsewhere in

this complaint.

85.

By engaging in the conduct alleged in the complaint, the Defendants as

plan fiduciaries, engaged in prohibited transactions under ERISA § 406 (a), 29 U.S.C. §

1106 (a).

86.

Specifically, the Defendants engaged in transactions prohibited by ERISA

§ 406 (a)(l)(C), 29 U.S.C. § 1106 (a)(1)(c) by causing the Plan to engage in transactions

or covering up transactions that they knew or should have known constituted a direct or

indirect furnishing of services between the Plans and a party in interest. Specifically,

the Defendants approved, authorized and caused the UST and SKA Plans to enter a

contract and make other arrangements that paid an unreasonable fee to Thomas

Thorndike and/or CJA in the form of excessive commission payments whereby he

and/or they profited from the Plans making imprudent investments.

87.

ERISA § 408 (b)(2), 29 U.S.C. § 1108 (b)(2), provides an exemption from

the prohibitions of ERISA § 406 (a), 29 U.S.C. § 1106 (a), for contracting or making

reasonable arrangements with a party in interest for, inter alia, services necessary for

the establishment or operation of the Plans, if no more than reasonable compensation is

paid. This exemption does not apply here. The value of the services that Thomas

Thorndike and/or CJA purportedly provided in exchange for the huge commissions are

completely unreasonable and have no rational relationship to the services rendered

given that Thorndike primarily passed on pre-packaged advice from CJA that—because

it was pre-packaged—required CJA little effort to prepare while adding his credibility

and recommendation to it as UST and SKA’s accountant and financial adviser.

Thorndike and CJA’s efforts were a substantial factor in causing the Plaintiffs’ losses but

required little effort that the market would perceive as deserving of compensation

anywhere near the amount paid.

88.

The Defendants engaged in transactions prohibited by ERISA § 406

(a)(l)(D), 29 U.S.C. § 1106 (a)(1)(D) by causing the Plans to engage in transactions that

they knew or should have known constitute a direct or indirect use by or for the benefit

of a party in interest, of any assets of the Plans. As a direct and proximate result of the

prohibited transactions alleged herein, the Plans, lost large portions of their plan

contributions.

89.

Under ERISA §§ 409 and 502 (a)(2) and (a)(3), 29 U.S.C. §§ 1109 (a) and

1132 (a)(2) and (a)(3), Defendants are liable to restore the losses to the Plans caused by

their breaches of fiduciary duties alleged in this Count and to provide other equitable

relief as appropriate.

XI. Causation.

90.

The UST and SKA Plans have lost hundreds of thousands of dollars

because substantial assets of the Plans were imprudently invested in breach of

Defendants' fiduciary duties.

91.

Defendants are liable for the Plans' losses in this case because the

Defendants were responsible for the decision to invest repeatedly in the FSL § 412 (e)(3)

annuities.

92.

Had the Defendants properly discharged their duties, the UST, SKA and

similarly situated Plans would have avoided some or all of the losses that it, and

indirectly, the participants suffered.

XII. Remedy for Breaches of Fiduciary Duty.

93.

The Defendants breached their fiduciary duties in that they knew or

should have known the facts as alleged above, and therefore knew or should have

known that the Plans' assets should not have been invested in the imprudent FSL § 412

(e)(3) annuities, remained there and been increased.

94.

As a consequence of the Defendants' breaches, the Plans suffered

significant losses.

95.

ERISA § 502(a)(2), 29 U.S.C. § 1132(a)(2) authorizes a plan participant to

bring a civil action for appropriate relief under ERISA§ 409, 29 U.S.C. § 1109. Section

409 requires "any person who is a fiduciary... who breaches any of the...duties imposed

upon fiduciaries...to make good to such plan any losses to the plan..." Section 409 also

authorizes "such other equitable or remedial relief as the court may deem appropriate..."

96.

With respect to calculation of the losses to the UST and SKA Plans,

breaches of fiduciary duty result in a presumption that, but for the breaches of fiduciary

duty, the Plans would not have made or maintained their investments in the challenged

investments and, instead, prudent fiduciaries would have invested the Plans’ assets in

the most profitable alternative investments available to them. The Court should adopt

the measure of loss most advantageous to the Plans. In this way, the remedy restores the

Plans' lost value and puts the Plaintiffs in the position they would have been in if the

Plans had been properly administered.

97.

Plaintiffs and the Class are therefore entitled to relief from the Defendants

in the form of: (a) a monetary payment to the Plans to make good to the Plans the losses

to the Plans resulting from the breaches of fiduciary duties alleged above in an amount

to be proven at trial based on the principles described above, as provided by ERISA §

409 (a), 29 U.S.C. § 1109 (a); (b) injunctive and other appropriate equitable relief to

remedy the breaches alleged above, as provided by ERISA §§ 409 (a), 502 (a)(2) and (3),

29 U.S.C. §§ 1109 (a), 1132 (a)(2) and (3); (c) injunctive and other appropriate equitable

relief pursuant to ERISA § 502 (a)(3), 29 U.S.C. § 1132 (a)(3), for knowing participation

by a non-fiduciary in a fiduciary breach; (d) reasonable attorney fees and expenses, as

provided by ERISA § 502 (g), 29 U.S.C. § 1132 (g), the common fund doctrine, and other

applicable law; (e) taxable costs and interest on these amounts, as provided by law; and

(6) such other legal or equitable relief as may be just and proper.

98.

Under ERISA, each Defendant is jointly and severally liable for the losses

suffered by the Plans in this case.

XIII. Class Action Allegations.

99.

Class Definition. Plaintiff brings this action as a class action under Fed.

R. Civ. P. 23 (a), (b)(1), (b)(2), and (b)(3) of the Federal Rules of Civil Procedure on

behalf of Plaintiff and the following class of persons similarly situated (the "Class"):

All investors of employee benefit plan trust money under a CJA or FAC

prototype or master employee benefit plan whose plan trust money was

invested in FSL’s §412 (e)(3) (a/k/a §412 (i)) annuities. The Class would

not include any investors who signed agreements to arbitrate any disputes

arising from their investments.

100. Numerosity. The members of the Class are so numerous that joinder of

all members is impracticable. While the exact number of Class members is unknown to

Plaintiff at this time, and can only be ascertained through appropriate discovery,

Plaintiff believes there are more than 100 members of the Class.

101.

Commonality. Common questions of law and fact exist as to all

members of the Class and predominate over any questions affecting solely individual

members of the Class. Among the questions of law and fact common to the Class are:

1) whether Defendants breached their fiduciary duties to Plaintiff and members

of the Class by failing to act prudently and solely in the interests of the Plans’

participants and beneficiaries;

2) whether Defendants enabled or knowingly participated in others breaches of

fiduciary duties;

3) whether Defendants failed to provide complete and accurate information to

the plans and their sponsors regarding the FSL § 412(e)(3) annuities and the

nature of all expenses associated with these investments; and

4) whether the members of the Class suffered losses and, if so, the proper

measure of such losses.

102. Typicality. Plaintiff's claims are typical of the claims of the members of

the Class because: (a) the conduct of Defendants giving rise to the claims is the same as

to all members of the Class; and (b) the losses suffered by the Plans are caused by the

inherent unsuitability and the standardized and inadequate disclosures associated with

Defendants’ pre-packaged product.

103. Adequacy. Plaintiffs will fairly and adequately protect the interests of

the members of the Class and have retained counsel competent and experienced in

ERISA class action litigation and complex class action litigation generally. Plaintiffs

have no interests antagonistic to or in conflict with those of the Class.

104. Rule 23 (b)(1) Requirements. Class action status in this action is

warranted under Fed. R. Civ. P. 23 (b)(1) because prosecution of separate actions by the

members of the class would create a risk of inconsistent or varying adjudications with

respect to individual class members that would establish incompatible standards of

conduct for the party opposing the class and adjudications with respect to individual

class members would, as a practical matter, be dispositive of the interests of the other

members not parties to the actions, or substantially impair or impede their ability to

protect their interests. Specifically, if the loads challenged here are inherently

unreasonable for employee benefit plans as claimed here such a determination would be

dispositive of the interests of other investors.

105. Rule 23 (b)(2) Requirements. Class action status in this action is

warranted under Fed. R. Civ. P. 23 (b)(2) because the parties opposing the class have

acted on grounds that apply generally to the class so that final injunctive relief of

corresponding declaratory relief is appropriate respecting the class as a whole.

Specifically, the products at the center of this lawsuit are pre-packaged using uniform

advice, uniform documents, and uniform plan administration documents.

106. Rule 23 (b)(3) Requirements. Class action status is also warranted

under Fed. R. Civ. P. 23 (b)(3) because: (a) prosecution of separate actions by the

members of the Class would create a risk of establishing incompatible standards of

conduct for Defendants; (b) Defendants have acted or refused to act on grounds

generally applicable to the Class, thereby making appropriate final injunctive,

declaratory, or other appropriate equitable relief with respect to the Class as a whole;

and (c) questions of law or fact common to members of the Class predominate over any

questions affecting only individual members, and a class action is superior to the other

available methods for the fair and efficient adjudication of this controversy.

XIV. Requested Relief.

107. The Plaintiff requests the following relief:

a. An Order compelling Defendants to make good to the Plans all losses to

the Plans resulting from Defendants' breaches of their fiduciary duties,

including losses to the Plans resulting from imprudent investment in

the FSL § 412(e)(3) annuities; to restore to the Plans all profits the

Defendants made through use of the Plans’ assets; and to restore to

the Plans all profits which the Plans would have made if Defendants

had fulfilled their fiduciary obligations;

b. Imposition of a Constructive Trust on any amounts by which any

Defendant was unjustly enriched at the expense of the Plans as the

result of breaches of fiduciary duty;

c. An Order requiring Defendants to provide an accounting of losses

suffered to the Plans as a result of Defendants' breaches of their

fiduciary duties;

d. An Order awarding actual damages in the amount of any losses the

Plans suffered;

e. An Order awarding pre- and post-judgment interest;

f. An Order awarding costs under ERISA § 502 (g), 29 U.S.C. § 1132 (g)

and other applicable laws or regulations;

g. An Order awarding attorneys' fees pursuant to ERISA § 502 (g), 29

U.S.C. § 1132 (g) and the common fund doctrine;

h. An Order or affirmative injunction for disgorgement of profits,

equitable restitution, contract reformation, surcharge and other

appropriate equitable and injunctive relief against the Defendants;

i. An Order certifying a class action under one or more of Rule 23 (b)(1),

23 (b)(2) or 23 (b)(3) of the Federal Rules of Civil Procedure.

j. Such other and further relief as to this Court may seem just and proper.

THE PLAINTIFFS:

BY/s/ Thomas G. Moukawsher

Thomas G. Moukawsher (ct08940)

Moukawsher & Walsh, LLC

Case 3:12-cv-01110 Document 1 Filed 08/01/12