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Case 2:12-cv-01951-FSH-JBC Document 8 Filed 07/25/12 Page 1 of 9 PageID: 659

IN THE UNITED STATES DISTRICT COURT


FOR THE DISTRICT OF NEW JERSEY

):
FEDERAL DEPOSIT INSURANCE ):
CORPORATION, in its capacity as receiver for ):
First State Bank, ):
):
Plaintiff, ):
):
v. ):
): Civ. A. No. 2:12-cv-01951-FSH-MAH
FRIERI CONROY & LOMBARDO, LLC ):
and ::
DONNA M. CONROY, ESQ., ::
:: JOINT DISCOVERY PLAN
::
Defendants/Third-Party Plaintiffs, ):
):
v. ):
):
MARK L. BREITMAN, ESQ., et al. ):
:
Third-Party Defendants. ):

1. For each party, set forth the name of the party, attorney appearing, the firm name,
address, email address, telephone number and facsimile number.

(a) Plaintiff, Federal Deposit Insurance Corporation,


in its capacity as receiver for First State Bank

John J. Murphy, III


William T. Mandia
Stradley Ronon Stevens & Young, LLP
A Pennsylvania Limited Liability Partnership
LibertyView
457 Haddonfield Road, Suite 100
Cherry Hill, NJ 08002
Tel: (856) 321-2400
Fax: (856) 321-2415
jmurphy@stradley.com
wmandia@stradley.com

(b) Defendants, Frieri Conroy & Lombardo, LLC and Donna M. Conroy, Esquire

Patrick J. Galligan
Graham Curtin
4 Headquarters Plaza
Case 2:12-cv-01951-FSH-JBC Document 8 Filed 07/25/12 Page 2 of 9 PageID: 660

Morristown, NJ 07962
Tel: (973) 292-1700
Fax: (973) 292-1767
pgalligan@grahamcurtin.com

(c) Additional Defendants, Mark L. Breitman, Esquire, Robert P. Keller, Michael


J. Maggiano, Esquire, and Thomas Ragukonis

Keith McKenna
McKenna Law Firm LLC
96 Park Street
Montclair, NJ 07043
Tel: 973.509.0050
Fax: 973.509.3580
keith.mckenna@mcklaw.net

(d) Additional Defendant Joseph D. Natale

David C. Stanziale
552 High Mountain Road
North Haledon, NJ 07508
Tel: (973)955-0470
Fax: (973)955-0473
stanzialelaw@aol.com

(e) Francesco DAngelo (not represented by counsel)

32 Reading Road
Flemington, NJ 08822

(f) Theodore M. Kest (not represented by counsel)

2 Fieldstone Court
Eatontown, NJ 07724

(g) Samuel Ventola (not represented by counsel)

6 Lafayette Drive
Cedar Grove, NJ 07009

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(h) James Scott Beresford (not represented by counsel)

2 Martin Place
Cranford, NJ 07016

2. (a) Set forth a brief description of the case, including the facts, causes of action and
affirmative defenses asserted.

A. Plaintiffs Position

The Federal Deposit Insurance Corporation is pursuing this professional


malpractice case in its capacity as receiver for First State Bank (FDIC-R). The FDIC-Rs
investigation of the facts and circumstances giving rise to this claim is ongoing and the factual
summary which follows is based upon the information currently known to the FDIC-R. On
October 14, 2011, the New Jersey Department of Banking and Insurance (NJDBOI) closed
First State Bank (the Bank) and appointed FDIC-R as the receiver for the Bank. This case was
pending in the Superior Court of New Jersey, Law Division, Union County, at the time of the
Banks failure. The state court stayed the case following the Banks failure on October 25, 2011.
FDIC-R was substituted as the Plaintiff in this action on March 29, 2012. FDIC-R timely
removed the case to this Court on March 30, 2012 under the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989. See 12 U.S.C. 1819(b)(2)(B).

FDIC-Rs claims arise out of acts and omissions committed by Defendants, Frieri
Conroy & Lombardo, LLC (Frieri LLC) and Donna M. Conroy (Conroy), (collectively, with
Frieri LLC Defendants), in connection with their representation of the Bank. Specifically,
Defendants represented the Bank in a series of related, round trip transactions that resulted in
significant losses to the Bank.

By way of background, on September 8, 2009, the Bank appointed


Primanagement, LLC, an entity wholly owned by Albert Gasparro (Gasparro), to serve as the
Banks purported investment advisor under the terms of an Investment Advisory Agreement. On
September 10, 2010, the Bank wired $12 million to Primanagement, Inc., another entity wholly
owned by Gasparro. The purported purpose of the transfer was for Gasparro to invest the funds
on the Banks behalf under the terms of the Investment Advisory Agreement.

On September 30, 2009, just a few weeks after it wired $12 million to Gasparro,
the Bank issued shares of stock to three entities identified as PG Capital Investments, LLC (PG
Capital), Ultravest Capital Corporation (Ultravest), and Silcap Partners, LLC (Silcap). The
Bank issued the stock as part of a purported capital infusion in which it was to receive $7 million
from PG Capital, Ultravest, and Silcap in return for the stock. All three of these entities,
however, were interrelated and subject to control by Gasparro. Moreover, the $7 million capital
infusion these entities provided was drawn from the $12 million the Bank had provided to
Gasparro earlier in the month.

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Following the issuance of the Banks stock, the Banks auditors discovered during
a routine audit for the fiscal year 2009 that the $12 million the Bank entrusted to Gasparro was
not being held in a separate account, as the Investment Advisory Agreement required. As a
result, the Bank requested the return of the funds from Gasparro. Gasparro initially did not
comply with these demands, but he eventually returned the Banks $12 million on June 1, 2010.

Before Gasparro returned the funds, however, the Bank extended three separate
lines of credit in May 2010 to PG Capital, Ultravest, and Silcap. These lines of credit, which
totaled $9.3 million, were used to fund Gasparros return of the $12 million that the Bank
originally provided to him in September 2009. The loans were purportedly secured by complex
financial insurance agreements. The financial insurance agreements, however, were a complete
fiction and wholly unenforceable.

Defendants served as legal counsel to the Bank in connection with the issuance of
its stock and the extension of the lines of credit to PG Capital, Ultravest, and Silcap. In their
capacity as counsel for the Bank, Defendants failed to discharge their professional obligations in
a number of material respects. Among other things, Defendants either knew or should have
known that PG Capital, Ultravest and Silcap were all interrelated and subject to Gasparros
control. Defendants also knew or should have known that the $7 million used to purchase the
Banks stock came from the $12 million that the Bank wired to Gasparro just a few weeks earlier
and that the $9.3 million that Bank extended under the lines of credit was used to return the $12
million the Bank initially provided to Gasparro. Defendants further knew or should have known
that the financial insurance agreements that purportedly collateralized the lines of credit were
unenforceable and that the underwriting on the lines of credit was completely inadequate.

As a result of the acts and omissions of the Defendants, FDIC-R is currently


pursuing a single claim against both Defendants for professional malpractice. FDIC-R seeks to
recover the significant losses the Bank sustained due to Defendants conduct.

B. Defendants, Frieri Conroy & Lombardo, LLC


and Donna M. Conroy, Esq.'s Position

Defendants, Frieri Conroy & Lombardo, LLC and Donna M. Conroy, Esq.
(hereinafter the "Frieri Conroy Defendants") dispute Plaintiff's position and further note that said
allegations have not been proven. Plaintiff's allegations against the Frieri Conroy Defendants
stem from two transactions for which the Frieri Conroy Defendants served as outside counsel to
Plaintiff: (1) a $7,000,000 capital raise, and (2) three underlying loans made by the Plaintiff to
certain investment entities: Ultravest Capital Corp., SilCap Partners, LLC, and PG Capital
Investments, LLC. With respect to Plaintiff's allegations regarding the capital raise, Plaintiff was
fully informed as to the identity of the entities. Plaintiff was to conduct its own due diligence
and Plaintiff's Board of Directors ultimately approved the capital raise. Similarly, it is
undisputed that Plaintiff approved the loans to Ultravest Capital Corp., SilCap Partners, LLC,
and PG Capital Investments, LLC and that Plaintiff was conducting the due diligence with
respect to the loans and the insurance agreements that were to collateralize the loans. The Frieri

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Conroy Defendants were not responsible for these tasks and therefore cannot be liable for any
damages resulting from Plaintiff's actions.
Further, the Frieri Conroy Defendants have filed a Third-Party Complaint for
indemnification and contribution against members of First State Bank's Board of Directors, Mark
L. Breitman, Esq., Franceso D'Angelo, Robert P. Keller, Theodore M. Kest, Michael J.
Maggiano, Esq., Joseph D. Natale, Thomas Ragukonis and Samuel Ventola, as well as Scott
Beresford, First State's Executive Vice President and Senior Lending Officer. Specifically, the
Frieri Conroy Defendants allege in the Third Party Complaint that, though they deny any and all
allegations of professional malpractice, to the extent that First State Bank establishes that it has
been damaged as a result of conduct alleged in the Complaint, that First State Bank's officers and
directors were negligent in the discharging of their respective duties of care, loyalty and
obedience and that those breaches proximately caused any such damage.
(b) Is this a fee-shifting case?

Yes ____ No __X__

If so, set forth legal authority.

__________________________________________________________________

3. Has this action been: Settled _No___ Discontinued __No__

If so, has there been a Stipulation/Dismissal filed?

Yes ___ No ____

4. Have settlement discussions taken place? No.

If so, when? ___________.

a. What was plaintiffs last demand?

(i) Monetary demand: $

(ii) Non-monetary demand:

b. What was defendants last offer?

(i) Monetary offer: $

(ii) Non-monetary offer:

5. Core discovery needed to be able to discuss settlement in a meaningful way:

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At this stage of the proceedings, the FDIC-Rrequires discovery concerning the


transactions that are the subject of its complaint and the conduct of Defendants Donna M.
Conroy and Frieri Conroy & Lombardo, LLC with respect to those transactions. In
addition, the Frieri Conroy defendants will require all documents related to First State
Bank's discussions, internal communications, and approval to go forward with the
transactions at issue.

6. FDIC-R and Defendants have exchanged the information required by Fed. R. Civ.
P. 26(a)(1). If not, state the reason therefor. Initial Disclosures have not been
produced by the Additional Defendants.

7. Explain any problems in connection with completing the disclosures required by


Fed. R. Civ. P. 26(a)(1). None.

8. The parties have not conducted discovery other than the above disclosures. If so,
describe.

9. The parties have met pursuant to Fed. R. Civ. P. 26(f).

(a) If not, state the reason therefor.

Not applicable.

(b) If so, state the date of the meeting and the persons in attendance.

Counsel for FDIC-R conferred with counsel for Defendants on June 21, 2012, and
reached an agreement regarding the schedule proposed in this plan. Counsel for
FDIC-R thereafter conferred with counsel for the other represented parties in this
case, who agreed to the schedule outlined in this joint discovery plan.

(c) If this is not a joint plan, set forth the reason.

This plan is joint among all of the parties who are represented by counsel. The
pro se parties are not parties to this plan. The pro se parties were advised in
writing of the Courts Order of May 22, 2012, scheduling the pre-trial conference
and were provided with a copy of that Order.

10. (a) Discovery is needed on the following subjects:

FDIC-R needs discovery on Defendants representation of the Bank in connection


with the transactions that are the subject of the Complaint. In particular, FDIC-R
needs discovery on Defendants involvement in the Banks issuance of stock to PG
Capital, Ultravest, and Silcap and the lines of credit extended to PG Capital,
Ultravest, and Silcap, including, but not limited to, any due diligence they

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conducted regarding the financial insurance agreements that purportedly served as


collateral.

(b) Discovery should not be conducted in phases or be limited to particular


issues.

(c) Maximum of 25 interrogatories by Plaintiff to Defendants and from


Defendants to Plaintiff. Maximum of 25 interrogatories from Plaintiff to
Third-Party Defendants and from Third-Party Defendants to Plaintiff.
Maximum of 25 interrogatories from Defendants to each Third-Party
Defendant and from Third-Party Defendants to Defendants.

(d) Plaintiffs and Defendants shall be permitted to take a maximum of 15


depositions. Third-Party Defendants shall be allowed a maximum of 15
depositions.

(e) Fact discovery to be completed by March 29, 2013

(f) Motions to amend or to add parties to be filed by October 1, 2012

(g) Plaintiffs expert report (if needed) due on April 29, 2013

(h) Defendants expert report (if needed) due on May 29, 2013

(i) Expert depositions to be completed by July 30, 2013. (if there is a need for a
liability expert and it is necessary to defer completion of expert discovery beyond
this deadline, set forth the reason).

(j) Dispositive motions to be served within 45 days of the completion of


discovery.

(k) Set forth any special discovery mechanism or procedure requested, including
data preservation orders or discovery confidentiality orders: The parties will seek
a confidentiality order to protect the information that will be exchanged between
them in this matter.

(l) The settlement pretrial conference may take place on September 30, 2013

(m) The final conference may take place on October 30, 2013

11. Do you anticipate any discovery issues, challenges or problems? No.

If so, explain.

__________________________________________________________________

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12. Do you anticipate any special discovery needs (i.e., videotape/telephone


depositions, problems with out-of-state witnesses or documents, etc.) . Yes.

If so, explain.

FDIC-R may take the deposition of Albert Gasparro. It is FDIC-Rs


understanding that Mr. Gasparro resides in Canada. The FDIC-R also believes
that certain relevant documents relating to the transactions described above may
be located in Canada and may require the use of special process or procedures to
procure their production.

13. State whether this case is appropriate for voluntary arbitration (pursuant to
L.Civ.R. 201.1 or otherwise), mediation (pursuant to L.Civ.R. 301.1 or
otherwise). If not, explain why and state whether any such procedure may be
appropriate at a later time (i.e., after exchange of pretrial disclosures, after
completion of depositions, after disposition of dispositive motions, etc.).

Given the complexity of the factual and legal issues involved, the parties do not
believe that this case is appropriate for arbitration. This case may be appropriate
for mediation.

14. Is this case appropriate for bifurcation? No.

15. We do not consent to the trial being conducted by a Magistrate Judge.

Respectfully submitted:

s/William T. Mandia
John J. Murphy, III
William T. Mandia
Stradley Ronon Stevens & Young, LLP
A Pennsylvania Limited Liability Partnership
LibertyView
457 Haddonfield Road, Suite 100
Cherry Hill, NJ 08002

Attorneys for Plaintiff,


Federal Deposit Insurance Corporation,
in its capacity as receiver for First State Bank

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s/ Patrick J. Galligan
Patrick J. Galligan
Graham Curtin
4 Headquarters Plaza
Morristown, NJ 07962

Attorneys for Defendants,


Frieri Conroy & Lombardo, LLC
and Donna M. Conroy, Esquire

s/Keith McKenna
Keith McKenna
McKenna Law Firm LLC
96 Park Street
Montclair, NJ 07043

Attorneys for Certain Additional Defendants

s/David C. Stanziale
David C. Stanziale
552 High Mountain Road
North Haledon, NJ 07508

Attorney for Additional Defendant Joseph D. Natale

Dated: July 25, 2012

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