IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

REGIONAL EMPLOYERS’ ASSURANCE : CIVIL ACTION

LEAGUES VOLUNTARY EMPLOYEES’ :

BENEFICIARY ASSOCIATION TRUST :

:

v. :

:

GRETCHEN HUTTO CASTELLANO : NO. 03-6903

MEMORANDUM AND ORDER

ELIZABETH T. HEY, U.S.M.J. February 10, 2016

Presently before the court in this ERISA case is a motion for prejudgment interest 

filed by Counterclaim Plaintiff (“Mrs. Castellano”). On August 24, 2015, after a twelveyear court battle, the Honorable Mary McLaughlin granted Mrs. Castellano’s motion for 

summary judgment, awarding her $750,000. Reg’l Emp’rs’Assurance Leagues 

Voluntary Emps’ Beneficiary Ass’n Trust v. Castellano, Civ. No. 03-6903 Doc. 351, 

2015 WL 5025446 (E.D. Pa. Aug. 25, 2015). Mrs. Castellano has now filed a motion for 

prejudgment interest on that amount. Doc. 355. For the reasons that follow, I conclude 

that such an award would be inequitable in the unique circumstances presented in this 

case, and will deny the motion. 

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I. FACTS AND PROCEDURAL HISTORY1 

Domenic M. Castellano, D.D.S., Mrs. Castellano’s husband, owned a dental 

practice which joined the Regional Employers’ Assurance League (“REAL”), an 

unincorporated association of employers who adopted a benefit structure for their 

employees’ under the REAL’s Voluntary Employees’ Beneficiary Association 

(“VEBA”). Castellano, 2015 WL 5025446, at *2-3. The assets of the REAL are held in 

trust by the REAL VEBA Trust. Id. The Trust documents and all of the adoption 

documents were authored by John Koresko, V, an attorney and public accountant. Id. at 

*2. 

Dr. Castellano sent contributions to the REAL VEBA Trust, part of which were

used to purchase a $750,000 flexible premium adjustable life insurance policy on Dr. 

Castellano, which named the Trustee of the REAL VEBA Trust as beneficiary. See

Castellano, 2015 WL 5025446, at *3-4. Upon Dr. Castellano’s death in 2003, the REAL 

VEBA Trust received a check for $751,266.18 in life insurance proceeds. Id. at *4. Mrs. 

Castellano submitted a REAL VEBA Death Benefit Form naming her as Dr. Castellano’s 

beneficiary. Id. In response, the plan administrator gave Mrs. Castellano a choice -- ten 

annual payments of $75,000 or a lump-sum payment of $597,560.14. Id. at *5. Mrs. 

Castellano, through counsel, demanded a lump-sum payment of $750,000, and, in 

 

1The facts and procedural history of the case are discussed at length in Judge 

McLaughlin’s decision and will be discussed only as necessary in considering the present 

motion. 

The counterclaim defendants include the plan, PennMont Benefit Services, Inc., 

the plan’s administrator, Jeanne D. Bonney, John J. Koresko, V, Koresko Financial L.P., 

and Koresko & Associates, P.C. I will refer to the counterclaim defendants as “the 

Koresko Entities” throughout this opinion.

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response, the administrator filed a declaratory judgment action against Mrs. Castellano. 

Id. at *5-6. On June 29, 2005, the plan administrator denied Mrs. Castellano’s claim for 

benefits. Id. 

In her opinion, Judge McLaughlin specifically ruled that the ultimate denial of 

benefits to Mrs. Castellano violated ERISA. The court did not determine the propriety of 

the settlement offers made by the administrator (the ten-year payout or reduced lump-sum 

payment) prior to the denial of all benefits. Castellano, 2015 WL 5025446, at *9 n.16, 

12. On August 24, 2015, more than twelve years after Dr. Castellano’s death and the 

submission of the Death Benefit Form, and nearly twelve years after the inception of this 

lawsuit, Judge McLaughlin granted summary judgment to Mrs. Castellano on her 

counterclaim for violation of ERISA section 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B), 

and ordered the REAL VEBA Trust to pay Mrs. Castellano $750,000. See id. at 14. 

Mrs. Castellano’s counsel has filed a motion for prejudgment interest. Doc. 355. 

The Koresko Entities have not responded to the motion.2 Considering the Department of 

 

2As I explained in my decision awarding attorneys’ fees to Mrs. Castellano’s 

counsel, the Koresko Entities have abandoned this litigation. Through most of the history 

of the case, they were all represented by Mr. Koresko and then briefly by other retained 

counsel. However, other counsel withdrew in 2013. See Doc. 314. Mr. Koresko was 

suspended from the practice of law by the Pennsylvania Supreme Court on December 19, 

2013, see In the Matter of: John J. Koresko, V, 13-mc-294 (E.D. Pa. Dec. 27, 2013) 

(Doc. 1), and disbarred from practice on September 4, 2015. See Doc. 354-2. The judges 

of this court are currently considering disciplinary action. See In the Matter of John J. 

Koresko, V, 13-mc-294 (E.D. Pa.). Although the individual Plaintiffs may represent 

themselves, the corporate Plaintiffs may not. Corporations may not be represented by 

other than licensed counsel. United States v. Cocivera, 104 F.3d 566, 572 (3d Cir. 1996). 

Neither Mr. Koresko on his own behalf nor any counsel on any defendants’ behalf have 

participated in the litigation since 2013. 

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Labor’s (“DOL”) familiarity with the related case, Perez v. Koresko, C.A. 09-988, I

asked the DOL to respond to the motion. The DOL has taken no position on the motion 

for prejudgment interest. Doc. 363 at 2. 

II. LEGAL STANDARD

The Third Circuit has held that, although ERISA does not specifically provide for 

the recovery of prejudgment interest on a delayed ERISA benefit, “an ERISA plaintiff 

who prevails under § 502(a)(1)(b) in seeking an award of benefits may request 

prejudgment interest under that section as part of his or her benefits award.” Skretvedt v. 

E.I. DuPont De Nemours, 372 F.3d 193, 207 (3d Cir. 2004). Such an award is committed 

to the broad discretion of the trial court. Id. at 206 (citing Ambromovage v. United Mine 

Workers, 726 F.2d 972, 981-82 (3d Cir. 1984)). “As a general rule, prejudgment interest 

is to be awarded when the amount of the underlying liability is reasonably capable of 

ascertainment and the relief granted would otherwise fall short of making the claimant 

whole because he or she has been denied the use of the money which was legally due.” 

Skretvedt, 372 F.3d at 208 (quoting Anthuis v. Colt Indus. Operating Corp., 971 F.2d

999, 1010 (3d Cir. 1992)). However, such an award should be denied if “exceptional or 

unusual circumstances exist making the award of interest inequitable.” Id. (quoting 

Anthuis, 971 F.2d at 1010); see also Ambromovage, 726 F.2d 972, 982 (prejudgment 

interest is to be “given in response to considerations of fairness [and] denied when its 

exaction would be inequitable”). 

Although the cases in our circuit establish that an award of prejudgment interest is 

the rule rather than the exception, the courts have identified circumstances when the 

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equities did not favor such an award. In Ambromovage, the Third Circuit approved the 

district court’s denial of prejudgment interest in a pension case when the union fund 

failed to properly collect pension contributions for a number of years. 726 F.2d 972. In 

the district court opinion in that case, the court noted that the union did not benefit 

financially from its failure, and reasoned that disgorgement of unjust enrichment did not 

favor an award of prejudgment interest. Nedd v. United Mine Workers, 488 F.Supp. 

1208, 1222 (M.D. Pa. 1980). While the district court recognized the time-value of 

money, noting that “nine million 1980 dollars cannot buy what nine million 1960 dollars

could,” id. at 1222, the court was swayed by another equitable consideration -- the same 

union that failed to collect the pension contributions also loaned large sums to the 

pension fund, a significant portion of which had been forgiven. Id. at 1223. The Third 

Circuit approved the district court’s exercise of discretion in denying prejudgment 

interest on equitable grounds. 726 F.2d at 982-83. 

The Third Circuit has also affirmed the denial of an award of prejudgment interest 

on equitable grounds in a subrogation/reimbursement case. Bill Gray Enters, Inc. Emp.

Health & Welfare Plan v. Gourley, 246 F.3d 206 (3d Cir. 2001) (abrogated on other 

grounds U.S. Airways, Inc. v. McCutchen, 663 F.3d 671 (3d Cir. 2011)). The court 

explained that the insured’s “refusal to reimburse the Plan was not motivated by bad faith 

nor was it unreasonable in the context of the complicated ERISA scheme” and “in 

balancing the equities it would be unfair to impose pre-judgment interest payments on 

[the insured].” Id. at 212 n.3. 

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Similarly, in GE Group Life Assur. Co. v. Turner, Civ. No. 05-342, 2009 WL 

150944 (W.D. Pa. Jan. 20, 2009), the district court declined to award prejudgment 

interest in an ERISA case in which the court found the insured had failed to repay an 

overpayment of disability insurance proceeds. Recognizing the economic realities of the 

situation, the court declined to make such an award. “In this matter, it appears that it will 

be difficult to recover any significant judgment from Defendant; consequently, such an 

award would not serve to make the prevailing party whole.” Id. at *8.

Based on caselaw from this circuit, although there is a presumption in favor of an

award of prejudgment interest to fully compensate an aggrieved party in the ERISA 

context, equitable considerations can overcome that presumption. 

III. DISCUSSION

Mrs. Castellano’s counsel argues the applicability of prejudgment interest in this 

case is “manifest.” Doc. 355-2 at 3. “Simply paying Mrs. Castellano $750,000 12 years 

after-the-fact will not remotely make her whole.” Id.3The problem with counsel’s 

argument is that he has completely overlooked the second part of the prejudgment 

interest test adopted by the Third Circuit, which requires the court to determine if the 

award would be inequitable. Upon consideration of the unusual circumstances of this 

case, I conclude that an award of prejudgment interest would be inequitable. 

This case is integrally related to Perez v. Koresko, Civil Action 09-988, an action 

brought by the DOL against Koresko and his related entities for various ERISA 

 

3Much of counsel’s brief is dedicated to the calculation of such interest and the 

determination of whether Mrs. Castellano was entitled to a lump-sum payment of 

$750,000 in 2003. 

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violations, and several other actions brought by participants in Koresko-marketed plans. 

In Perez, Judge McLaughlin granted summary judgment to the DOL, finding that 

Koresko and the related entities had violated their fiduciary duties and misappropriated 

assets belonging to the REAL VEBA and SEWBPT Trusts. See 86 F. Supp.3d 293 (E.D. 

Pa. 2015). Judge McLaughlin detailed transfers of Trust assets to, among many others, 

the Koresko law firm, to lobbying firms, assets used to purchase multiple condominium 

units in Nevis, transfers to a lawfirm in Anguilla, the purchase of a property in South 

Carolina, and payments for litigation expenses and outside attorneys. Id. at 341-44, 347-

54. Additionally Judge McLaughlin noted that Koresko further depleted Trust assets by 

taking out loans on the life insurance policies owned by the REAL VEBA and SEWBPT 

Trusts. She estimated that between August and November 2009, Mr. Koresko withdrew 

over $35 million in loans. Id. at 348-49. At the time of Judge McLaughlin’s decision, 

she had already appointed an Independent Fiduciary to manage the Trusts and taken 

control of $19,987,362.16 in Trust assets. Id. at 393-94. Judge McLaughlin found that 

the Koresko Entitites were liable for an additional $19,852,114.88, and ordered 

restitution and disgorgement in that amount.4 Id. at 394. Shortly after her decision, 

Judge McLaughlin appointed a forensic accountant to conduct an equitable accounting of 

the Trusts’ assets and develop methodologies for the equitable distribution of the Trusts’ 

assets. C.A. 09-988, Doc. 1240 at 2. That process is currently ongoing. The remainder 

 

4

Judge McLaughlin later amended the order to reduce the award from 

$38,417,109.63 to $38,337,540.89 to account for errors in the original accounting. Civ. 

No. 09-988, Doc. 1198. 

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of the cases brought by plan participants against the Koresko Entitites have been stayed 

pending the equitable distribution of the Trusts’ assets.

Although the court recognizes that the value of Mrs. Castellano’s $750,000 award 

is depleted by the 12 years it took her to obtain it,5the economic reality is that other Trust 

beneficiaries will bear the cost of every dollar that is given to Mrs. Castellano in 

prejudgment interest.6 Based on her position as the first of the victims of the Koresko 

scheme to file suit, Mrs. Castellano’s case was decided prior to the forthcoming equitable 

distribution of the Trusts’ assets. See Doc. 351 at 31-32. Her claim was for $750,000 

and she received that, albeit delayed. The other Trust beneficiaries will not be in the 

same position. Judge McLaughlin has already determined that there is a shortfall of over 

$19 million due to the malfeasance of the Koresko Entities. The full extent of the 

depletion of assets will only be known when the forensic accountant completes its 

accounting, which is expected in the near-future. Thus, the equities weigh heavily 

 

5

In her decision granting Mrs. Castellano’s motion for summary judgment, Judge 

McLaughlin did not determine the propriety of the Koresko Entitites’ offer to settle the 

death claim for a payout over ten years or an up-front settlement of a reduced value. 

Rather, Judge McLaughlin’s decision was limited to the Koresko Entities’ ultimate denial 

of any death benefit to Mrs. Castellano. Doc. 351 at 22 n.16, 30. In light of my decision 

not to award prejudgment interest, I similarly do not decide whether Mrs. Castellano was 

entitled to the entire policy amount upon her husband’s death.

6

It is unclear what, if any, assets can be recovered from the Koresko Entities. As 

previously noted, they have abandoned this litigation. Even after Judge McLaughlin 

froze any assets that were found and traceable to the Trusts and installed the Independent 

Fiduciary, Mr. Koresko shifted assets. See Perez, 86 F. Supp.3d at 367-69. Judge 

McLaughlin’s detailed analysis of the movement of the monies demonstrates the lengths 

to which the Koresko Entities went to abscond with Trust assets. Some of the converted 

money was used to purchase condominiums in Nevis and additional money was 

transferred to Anguilla. Tracking the movement of the money and the sheer number of 

accounts through which it traveled was akin to trying to put socks on an octopus. 

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against an award of prejudgment interest to Mrs. Castellano and I will exercise my 

discretion to deny such award.

An appropriate order follows.

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