Free Declaration in Support - District Court of California - California

Case 3:08-cv-04128-PJH

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Filed 08/29/2008

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STANLEY E. KEEN Regional Solicitor ROBERT M. LEWIS, JR. Counsel for ERISA DANE L. STEFFENSON GA Bar No. 677780 Trial Attorney Office of the Solicitor UNITED STATES DEPARTMENT OF LABOR 61 Forsyth St., Room 7T10 Atlanta, Georgia 30303 Telephone (404) 302-5435 Fax (404) 302-5438 Email: [email protected] Attorneys for Petitioner, United States Department of Labor IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA OAKLAND DIVISION ELAINE L. CHAO, ) Secretary of Labor, ) United States Department of Labor, ) ) Petitioner, ) ) v. ) ) MATTHEW J. DONNELLY and THE ) BUSINESS APPRAISAL INSTITUTE, ) ) Respondents. )

Civil Case No.

AFFIDAVIT IN SUPPORT OF PETITION TO COMPEL RESPONDENTS TO PRODUCE DOCUMENTARY EVIDENCE STATE OF GEORGIA COUNTY OF FULTON ) ) )

Jennifer Del Nero, being duly sworn, deposes and says: 1. I am an investigator for the Employee Benefits

Security Administration, United States Department of Labor

Declaration of Investigator Jennifer Del Nero in Support of Secretary's Petition to Enforce Subpoena

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("EBSA"), and work in EBSA's Atlanta Regional Office located in Atlanta, Georgia. I am over 18 years of age and have personal

knowledge of all matters related in this Affidavit. 2. In the course of my official duties, I have been

conducting investigations of the Bruister & Associates Employee Stock Ownership Plan (the "ESOP") and the Bruister & Associates Eligible Individual Account Plan (the "EIAP")(collectively, the "Plans"), including service providers and others related to the Plans, to determine whether any person has violated or is about to violate any provision of Title I of the Employee Retirement Income Security Act of 1974 ("ERISA"), or any regulation or order issued thereunder. 3. During the course of my investigation, I learned that

Respondents Matthew J. Donnelly ("Donnelly") and the Business Appraisal Institute ("BAI") provided valuation services to Bruister & Associates, Inc. ("Bruister"), a closely-held corporation, and the Plans for several transactions in which the Plans purchased Bruister stock, which has no generally recognized market, from a party-in-interest. 4. Donnelly is a California resident residing at 180 2nd Donnelly owns and

Street, Suite 419, Oakland, California 94607.

conducts business as The Business Appraisal Institute ("BAI") pursuant to a Fictitious Business Name filed with the County of San Francisco on April 1, 2003. BAI has a mailing address in

San Francisco, but the work Donnelly performs as BAI is performed at his residence in Oakland.

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5.

Section 406(a) and (b) of ERISA, 29 U.S.C. § 1106(a)

and (b), prohibits the transactions described in paragraph 3 unless the transaction is exempt under Section 408(e) of ERISA, 29 U.S.C. § 1108(e), requiring, among other conditions, that the acquisition or sale of stock having no generally recognized market is for adequate consideration, which is defined, in Section 3(18) of ERISA, 29 U.S.C. §1002(18), as "the fair

market value of the asset as determined in good faith by the trustee or named fiduciary pursuant to the terms of the plan and in accordance with regulations promulgated by the Secretary" when, as here, there is no generally recognized market. 6. To determine the amount the Plans would pay for the

Bruister stock, the Plans' fiduciaries retained Donnelly and BAI (the "Respondents") to perform valuations to determine the fairmarket value of Bruister stock. Facts have arisen during the

investigation requiring further investigation to determine whether or not there may be violations of ERISA related to Respondents' valuations. 7. During the investigation, I have also learned that

Respondents provided similar valuation services to other ERISAcovered plans and plan sponsors in connection with similar transactions involving employer securities that have no generally recognized markets. Such valuations and the

methodologies, purpose and use of such valuations are directly relevant to the investigation and in determining whether there may be violations of ERISA. Accordingly, it is necessary for me

to have access to and examine all documents sought in the

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subpoena from Respondents in order to determine whether any person, including Respondents, have violated or are about to violate ERISA with respect to these issues. 8. Based upon my investigation, I have reason to believe

that documents, including computer(s) with Quickbooks and other electronic files, involving valuation services and the actual valuation of assets of various ERISA-covered Plans are in the possession of Respondents in Oakland, California. All such

documents are needed to determine and evaluate the methodology and validity of the valuation and extent of possible violations of Title I of ERISA. 9. On or about March 20, 2008, Respondents received by

certified mail the subpoena dated March 13, 2008, requiring them to produce certain documents and records and to appear at the EBSA office in Atlanta, Georgia on March 28, 2008. The subpoena A

was signed by the Regional Director of EBSA, R.C. Marshall.

true and accurate copy of the subpoena and return receipt are attached as Exhibit A to this Affidavit. 10. On March 24, 2008, Respondents' attorney, Larry Israel,

sent a fax acknowledging his clients' receipt of the subpoena, and answered the subpoena by asserting a few objections and stating that Respondents had no responsive documents other than those to which the objections applied. A true and accurate copy

of the fax is attached as Exhibit B to this Affidavit. 11. Under a prior subpoena, Respondents produced most

documents that they possess related to the Bruister Plans. However, Respondents have not produced documents related to

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billing or amounts Respondents have received for their services, or communications and other documents related to services provided to ERISA-governed plans other than the Bruister Plans. 12. To date, Respondents have provided no documents

responsive to paragraphs 1 or 3-9 of the subpoena served on Respondents in this matter.

__________________________ Jennifer Del Nero Investigator Subscribed and sworn to before me this 28th day of August, 2008.

NOTARY PUBLIC My Commission Expires

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