IN THE UNITED STATES DISTRICT COURT 

FOR THE EASTERN DISTRICT OF PENNSYLVANIA 

_____________________________ 

HILDA SOLIS, SECRETARY OF : CIVIL ACTION 

LABOR, UNITED STATES : 

DEPARTMENT OF LABOR : 

 : 

 v. : 

 : 

JOHN J. KORESKO, V, et al. : NO. 09-988 

______________________________ 

REGIONAL EMPLOYERS ASSURANCE : 

LEAGUES VOLUNTARY EMPLOYEES’ : 

BENEFICIARY ASSOCIATION TRUST : 

: 

v. : 

: 

GRETCHEN CASTELLANO : 

: 

v. : 

: 

REGIONAL EMPLOYERS ASSURANCE : 

LEAGUES VOLUNTARY EMPLOYEES’ : 

BENEFICIARY ASSOCIATION TRUST : 

BY PENMONT BENEFIT SERVICES, : 

INC., PLAN ADMINISTRATOR, : 

et al. : NO. 03-6903 

______________________________ 

HARRY R. LARKIN, et al. : 

: 

v. : 

: 

PENN PUBLIC TRUST, et al. : NO. 11-7421 

______________________________ 

GREGORY A. OSWOOD, et al. : 

: 

v. : 

: 

PENN PUBLIC TRUST, et al. : NO. 13-0666 

______________________________ 

BEN-LIN ASSOCIATES, LTD., : 

et al. : 

 : 

 v. : 

 : 

PENN PUBLIC TRUST, et al. : No. 13-5268 

______________________________ 

Case 2:03-cv-06903-MAM Document 334 Filed 09/18/13 Page 1 of 15
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MEMORANDUM 

McLaughlin, J. September 17, 2013 

 On September 16, 2013, the Court issued a limited 

injunction order for a limited period, appointing an independent 

fiduciary to administer the plans, employer arrangements, and 

the two trusts at issue (Single Employer Welfare Benefit Plan 

Trust (“SEWBPT”) and Regional Employers Assurance League 

Voluntary Employees’ Beneficiary Association Trust (“REAL 

VEBA”)) in these actions. The independent fiduciary is to 

report back to the Court on or before October 28, 2013, with 

respect to its inventory of all assets of REAL VEBA, SEWBPT, and 

its constituent employer-level plans or arrangements. 

 The Court took this action because of a series of 

events starting on June 5, 2013, when plaintiffs filed their 

Motion for Temporary Restraining Order and Preliminary 

Injunction in the Castellano (Docket No. 292), Oswood (Docket 

No. 34), and Larkin (Docket No. 52) cases captioned above. The 

Department of Labor (“DOL”) similarly filed an Application for 

Temporary Restraining Order and Preliminary Injunction (Docket 

No. 377) on June 19, 2013. The DOL also filed a Motion for 

Clarification of Order and Supplemental Order (Docket No. 472), 

and SEWBPT filed a Motion to Modify Freeze Orders and for 

Expedited Consideration (Docket No. 485). This series of events 

culminated in an all-day hearing held on September 16, 2013. 

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 The Court incorporates into this decision its prior 

decision on the motion for partial summary judgment, its orders 

of June 28 (Docket No. 392), July 9 (Docket No. 407), and July 

23, 2013 (Docket No. 436), and the transcripts of the hearings 

and arguments it held on June 26 (Docket No. 397), June 28 

(Docket No. 420), July 8 (Docket No. 429), July 9 (Docket No. 

431), July 22 (Docket No. 458), and July 30, 2013 (Docket No. 

467). 

 The DOL filed a Complaint on March 9, 2009, alleging 

that Defendants John Koresko, Jeanne Bonney, PennMont Benefit 

Services, Inc. (“PennMont”), Koresko Law Firm (“KLF”), Koresko 

and Associates, P.C. (“KAPC”), Penn Public Trust (“PPT”) and 

Community Trust Co. (hereinafter Mr. Koresko, PennMont, KLF, 

KAPC, and PPT will be referred to together as the “Koresko 

Defendants”) were fiduciaries to ERISA-covered employer-level 

plans. The DOL further alleged that these fiduciaries had 

violated ERISA by, among other things, transferring death 

benefits outside the trust holding the plans' assets. 

 That same death benefit arrangement is at issue in 

more than ten other cases pending before this Court, including 

those captioned above. One such case was filed as late as last 

week, requesting a temporary restraining order and preliminary 

injunction. See Ben-Lin Associates, Ltd. et al. v. Penn Public 

Trust et al., No. 13-5268 (E.D. Pa.). In Real VEBA v. 

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Castellano, No. 03-6903, Mr. Koresko brought suit against a 

claimant for a declaratory judgment that she was not entitled to 

any benefits. Several cases, including Larkin et al. v. Penn 

Public Trust et al., No. 11-7421, and Oswood et al. v. Penn 

Public Trust et al., No. 13-0666, involve attempts by plaintiffs 

to extricate the life insurance policies on employees’ lives 

from the arrangements at issue here, prior to the deaths of the 

insureds. 

The DOL moved in February 2012 for partial summary 

judgment based on the Defendants' transfer outside the trust of 

death benefits paid on the policies held by the Castellano, 

Decor Coordinates, and Cetylite Plans. (Docket No. 267). On 

August 3, 2012, this Court granted in part and denied in part 

the DOL's Motion, holding that Mr. Koresko, Ms. Bonney and 

PennMont had violated ERISA as asserted by the DOL, but 

deferring judgment on the DOL's request for relief. (Docket 

Nos. 314, 315). The Court held that ERISA applied to certain 

employer-level plans that participated in REAL VEBA and that the 

moneys in REAL VEBA were plan assets. Solis v. Koresko, 884 F. 

Supp. 2d 261 (E.D. Pa. 2012). 

 On November 8, 2012, the DOL filed a Supplemental 

Complaint alleging that the Defendants violated ERISA when they 

applied for and obtained loans secured by insurance policies 

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owned by the trust and deposited the loan proceeds in their own 

accounts. (Docket No. 349). 

 On June 19, 2013, the DOL filed an Application for 

Temporary Restraining Order and Preliminary Injunction (Docket 

No. 377), arguing that Mr. Koresko, PennMont, PPT, KAPC, and KLF 

were continuing to violate ERISA and dissipate plan assets. 

Following a telephone conference on June 28, 2013 (Docket No. 

420), the Court scheduled a hearing on the temporary restraining 

order motions for July 8, 2013 (Docket No. 391). 

 On June 28, 2013, the Court also signed an interim 

order, freezing several bank accounts pending the hearing on 

July 8, 2013. (Docket No. 392). During that freeze, PennMont, 

and PPT and its officers, directors, fiduciaries, and other 

agents were authorized to pay insurance premiums on life 

insurance policies owned by or for the benefit of REAL 

VEBA/SEWBPT or its constituent employer-level plans or 

arrangements. 

 Following the hearing held on July 8 and 9, 2013 

(Docket Nos. 429, 431), the Court issued on July 9, 2013 an 

order granting a limited injunction. (Docket No. 407). Due to 

Mr. Koresko’s medical concerns, the Court conducted the July 8, 

2013 hearing as an opportunity to hear about the status of Mr. 

Koresko’s physical condition and to hear arguments regarding the 

appropriate form of interim relief to implement pending an 

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evidentiary hearing. The hearing included hours of discussion 

with Mr. Koresko about the facts regarding the administration of 

the trusts and the documentary record in the case created by the 

various motions for a temporary restraining order and 

preliminary injunction and the existing summary judgment record. 

 Mr. Koresko has argued that his ability to participate 

in a deposition, evidentiary hearing, or other proceeding is 

hindered by a concussion Mr. Koresko sustained approximately 

five years ago, and that a recent automobile accident 

exacerbated. See Docket No. 391 (order modifying July 8, 2013 

hearing to include a status hearing on Mr. Koresko’s health and 

postponing deposition of Mr. Koresko); Docket No. 399 

(declaration of Lawrence Koresko detailing Mr. Koresko’s 

injuries); Docket No. 429 (transcript of July 8 hearing).1

 

 Mr. Koresko’s health is relevant to a few actions 

taken by the Court. For example, no evidentiary hearing or 

depositions could be held due to Mr. Koresko’s insistence that 

his medical condition prevented him from participating in such 

proceedings. Mr. Koresko’s health also supported the Court’s 

appointment of the independent fiduciary because of an apparent 

lack of control over the REAL VEBA, SEWBPT, and associated plans 

and arrangements, due to that illness. 

 

1

 Other filings relevant to Mr. Koresko’s medical condition have 

been filed under seal. See Docket Nos. 401, 402. 

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 Although the Court has bent over backward to 

accommodate Mr. Koresko’s health concerns, the Court had ordered 

the Koresko Defendants to provide, prior to the July 8 hearing, 

a second declaration from Mr. Koresko’s physician, Dr. Bradley, 

regarding Mr. Koresko’s test results, Dr. Bradley’s diagnosis of 

Mr. Koresko, and the doctor’s opinion of Mr. Koresko’s ability 

to participate in a deposition and evidentiary hearing. (Docket 

No. 391). No such affidavit has ever been forthcoming. 

 Immediately before the July 8 hearing was set to 

begin, Mr. Koresko’s counsel at Montgomery, McCracken, Walker & 

Rhoads (“Montgomery, McCracken”), informed the Court that they 

would be moving to withdraw as counsel. Mr. Koresko had been 

previously informed of his counsel’s intention and of the 

hearing date but did not attend the hearing in person. The 

Court discussed the issue of withdrawal of counsel with the 

counsel from Montgomery, McCracken and Mr. Koresko in chambers 

on the record and ex parte. Mr. Koresko then participated in 

the discussion of substantive issues in open court via phone. 

See Docket 407 at 2 n.1 (portion of July 9, 2013, order 

discussing Mr. Koresko’s participation by phone). 

 Montgomery, McCracken filed their formal motion to 

withdraw as counsel for the Koresko defendants on July 16, 2013. 

(Docket No. 424, under seal). The DOL filed its opposition to 

that motion on July 25, in the timeframe ordered by the Court, 

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arguing that the motion was filed less than four weeks before 

the scheduled preliminary injunction hearing and that 

representation by Mr. Koresko of the Koresko Defendants would 

pose a conflict of interest. (Docket No. 443). The Court 

granted the motion to withdraw by Montgomery, McCracken on June 

30, 2013 (Docket No. 456). 

 On July 9, the Court entered a modified version of the 

June 28, 2013 order, removing three bank accounts included in 

the 16 bank accounts frozen on June 28, 2013, but otherwise 

continuing the temporary freeze. (Docket No. 407). In this 

order, the Court also declined to install an independent 

fiduciary, as suggested in the DOL’s Application, without first 

holding a full evidentiary hearing on the matter. 

 On July 23, 2013, the Court denied the Koresko 

Defendants’ motion to postpone the August 12, 2013 evidentiary 

hearing. (Docket No. 434). The Court also issued a third 

interim order (Docket No. 436), in response to the Koresko 

Defendant’s attempts after July 8, 2013, to remove cash value 

from insurance policies at issue. 

 The Court again found a likelihood of success on the 

merits of the DOL’s ERISA claims and its claims of breach of 

fiduciary duties and that there was a probability of irreparable 

injury to the public and to the plans and their participants and 

beneficiaries without the relief requested. The Court 

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prohibited the Koresko Defendants from expending or otherwise 

disposing of the cash value, or reducing the value, of any life 

insurance policies owned by or for the benefit of REAL 

VEBA/SEWBPT or its plans or arrangements. The insurance company 

was permitted to deduct premiums or charges to keep the policies 

in force. The Court also required information from the Koresko 

Defendants regarding current applications to the life insurance 

companies and an accounting of the policies. 

 On July 25, 2013, a suggestion of bankruptcy was filed 

by REAL VEBA, SEWBPT, PPT, PennMont, KAPC, and KLP in several 

cases related to this death benefits arrangement. The Court 

granted the automatic stay triggered by the filing of a 

bankruptcy proceeding in the above-captioned Castellano, Oswood, 

and Larkin cases on July 29, 2013, as well as in Sharkey et al. 

v. Penn Public Trust et al., No. 12-1166 (E.D. Pa.) and Neste et 

al. v. General American Life Insurance Company et al., No. 09-

4581 (E.D. Pa.) on August 1, 2013. The Court issued on July 29, 

2013, an order that the DOL case shall remain active and proceed 

because the Department of Labor’s action was exempt from the 

automatic stay under 11 U.S.C. § 362(b)(4), excepting actions to 

enforce a governmental unit’s police or regulatory power. 

(Docket No. 446). 

 The Court scheduled depositions of John J. Koresko, 

Lawrence Koresko, and Larry Townsend in anticipation of the 

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evidentiary hearing scheduled for August 12, 2013. (Docket No. 

447). The Koresko Defendants, however, filed a motion for 

reconsideration of the Court’s automatic stay decision on July 

30, 2013. (Docket No. 449). The Court, in response, continued 

the depositions and the August 12, 2013 evidentiary hearing 

until the motion for reconsideration was briefed and decided and 

because the entity defendants were without counsel as a result 

of the motion to withdraw. (Docket No. 457). 

 On August 27, while the Koresko Defendants’ respective 

bankruptcy actions were still in progress, the DOL filed a 

Motion for Clarification of Order and Supplemental Order. The 

Court received a response to that motion on September 3, 2013, 

in the time period ordered by the Court. (Docket No. 477). 

 On August 29, the Court denied the Koresko Defendants’ 

Motion for Reconsideration in an order and memorandum bearing 

that date. The Court again held that the DOL’s action was 

exempt from the bankruptcy stay under 11 U.S.C. § 362(b)(4). 

(Docket Nos. 474, 475). The Court also requested a proposed 

schedule from the parties in the DOL case as to proceeding with 

the preliminary injunction hearing that had been continued. The 

DOL responded with a schedule on September 9, 2013 (Docket Nos. 

481, 482), as ordered, and Mr. Koresko notified the Court that 

he was unable to comply with the Court’s order due to illness. 

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 In the bankruptcy actions before Judge FitzSimon, the 

six Koresko debtors filed for joint administration of the 

bankruptcy actions and applied for Hangley Aronchick Segal 

Pudlin & Schiller to serve as counsel for all six debtors. 

(Docket No. 8).2

 The bankruptcy court denied those motions on 

August 9, 2013. (Docket No. 45). On August 26, the bankruptcy 

court issued another order that required the debtors to file an 

application for new counsel by August 29, 2013, or the case 

would be dismissed. (Docket No. 75). The bankruptcy court 

reasoned that no counsel was appointed to represent the debtor 

(REAL VEBA), proposed counsel could not demonstrate that it 

could represent the debtor, and the debtor failed to demonstrate 

the propriety of the proposed retainer. 

 On August 30, REAL VEBA filed an application in the 

bankruptcy court to appoint Dilworth Paxson LLP (“Dilworth”) as 

counsel, as well as to retain Dilworth in three of the related 

cases (with debtors SEWBPT, PPT, and PennMont). (Docket No. 

82). The bankruptcy court issued an order scheduling a 

September 3, 2013 telephone conference for the debtor to show 

cause why the case should not be dismissed. (Docket No. 84). 

 

2

 There were six separate Chapter 11 petitions filed in the 

bankruptcy court on behalf of REAL VEBA (No. 13-16440), SEWBPT 

(No. 13-16441), PPT (No. 13-16443), PennMont (No. 13-16444), 

KAPC (No. 13-16445), and KLP (No. 13-16446). The docket numbers 

used to describe the bankruptcy proceedings originate from In re 

Regional Employers Assurance Leagues Voluntary Employees’ 

Beneficiary Association Trust, No. 13-16440 (E.D. Pa. Bankr.). 

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 Finally, following the September 3, 2013, hearing, the 

bankruptcy court dismissed all six of the Koresko debtors’ 

cases. The bankruptcy court reasoned that four related debtors 

were seeking to retain a single law firm (Dilworth), which was a 

proposal specifically precluded by “substantial and pervasive 

conflicts of interest among three of these related debtors” at 

prior hearings. (Docket No. 89). The bankruptcy court reasoned 

that the law of the case doctrine applied to preclude 

relitigation of this finding. 

 Following the dismissal of the bankruptcy actions, the 

Dilworth firm requested a case management conference in this 

Court by letter. That request was denied on September 6, 2013, 

because Dilworth had not entered an appearance in the DOL case 

pending in this Court, and there was no appeal from the 

bankruptcy court pending before this Court. 

 On September 10, 2013, SEWBPT, as represented by 

Dilworth Paxson, filed a Motion to Modify Freeze Orders and for 

Expedited Consideration. In that motion, SEWBPT requested that 

the Court modify the prior freeze orders to permit payment of 

Dilworth and other bankruptcy professionals in order for the 

Koresko Defendants to appeal the dismissal of the bankruptcy 

cases. The motion argued that Dilworth would “work to utilize 

the organizational structure that the bankruptcy process 

provides to devise an overarching solution to the concerns 

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surrounding SEWBPT and its affiliates.” (Docket No. 485 at 1-

2). The Court issued an order scheduling the hearing on 

September 16, 2013 to deal with several of the outstanding 

motions. 

 One of the most recent cases dealing with these death 

benefit arrangements, Ben-Lin Associates, was filed in 

conjunction with a motion for a temporary restraining order and 

preliminary injunction. (Docket No. 3). In that motion, and as 

reflected in the DOL’s Motion for Clarification of Order and 

Supplemental Order, the Koresko Defendants sent letters, in late 

August 2013, to several “persons associated with REAL VEBA or 

Single Employer Welfare Plan Trust,” employers participating in 

Plans with assets in REAL VEBA and/or SEWBPT, stating that plan 

participants were required to pay a reorganization fee 

assessment and general administrative fee assessment by 

September 13, 2013, at 5:00 pm. If the participants failed to 

pay the fees, participants’ rights in the benefits plan at issue 

would be “irrevocably ended” at that time and “the right to 

claim benefits by all eligible participants shall cease 

forever.” The employer would forfeit its right to participate 

in the Trust and their participants’ beneficiaries would be 

rendered ineligible for death benefits. 

 The Court granted the DOL’s Motion for Clarification 

of Order and Supplemental Order in part on September 11, 2013, 

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to prevent the Koresko Defendants from cutting off plan 

beneficiaries’ benefits on September 13, 2013. (Docket No. 

489). These letters illustrate some of the acts taken by the 

Koresko Defendants, while in bankruptcy proceedings, that 

circumvent the spirit of this Court’s prior freeze orders. 

 As reflected in the record discussed above, and as 

argued at the September 16, 2013, hearing, the DOL and the 

private litigants have demonstrated a substantial likelihood of 

success on the merits of their ERISA claims and their claims of 

breach of fiduciary duties and the probability of irreparable 

injury to the public and to the plans and their participants and 

beneficiaries absent the relief requested. 

 The Court has no choice but to appoint an independent 

fiduciary over the trusts at issue in these cases. The Court 

has attempted to maintain the status quo until Mr. Koresko’s 

alleged health problems were improved. But Mr. Koresko has 

continued to violate the spirit of the Court’s orders at every 

turn. 

— As an initial matter, other than an initial 

conclusory affidavit from a physician that was based 

primarily on Mr. Koresko’s statements to the 

physician and no clinical evaluation, Mr. Koresko 

has not submitted any additional affidavit or recent 

medical records substantiating his condition 

although ordered to do so by the Court. 

— Mr. Koresko circumvented the Court’s initial freeze 

order by contacting insurance companies and 

attempting to extract cash value out of the 

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insurance policies at issue in the lawsuits pending 

before this Court. 

— Mr. Koresko filed bankruptcy proceedings on behalf 

of several of the defendants to try and take 

advantage of the automatic stay to avoid the 

evidentiary hearing scheduled by the Court. 

— During the bankruptcy proceedings, the Koresko 

Defendants threatened to cut off plan participants’ 

benefits “forever” unless those participants paid 

fees to KLF, referencing the costs of reorganization 

and the Koresko Defendants’ bankruptcy actions. 

 After recent exigencies concerning plan funds and 

potential termination of participants’ and beneficiaries’ 

benefits, the Court is greatly concerned about its current 

inability to inventory any diverted assets and all other assets 

of the REAL VEBA, SWEBPT, and its constituent employer-level 

plans or arrangements, as well as allocating those assets to 

participants and beneficiaries of the plans. The Court now sees 

a real emergency posed, in light of these recent developments, 

the bankruptcy filings, and correspondence from the Koresko 

defendants attempting to get payments from plan beneficiaries, 

in getting control of the dispersed trust assets and determining 

the state of those assets. An independent fiduciary will 

accomplish those tasks with oversight by the Court. 

 An appropriate Order has issued, dated September 16, 

2013. 

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