Tuesday, September 07, 2021

Pension Can Be Seized to Satisfy Restitution Obligation, With Limitations

 US v. Frank: Over the course of a decade, Frank embezzled millions of dollars from his employer. He pleaded guilty to wire fraud and was sentenced to 78 months in prison and a restitution obligation of more than $19 million, of which the Government had recovered $7 million. To recover more, the Government sought access to Frank’s 401(k) retirement account, which totaled about half-a-million dollars. The district court granted the Government’s motion and ordered the disgorgement of the retirement funds to pay the restitution obligation.

On appeal, the Fourth Circuit affirmed the district court’s decision, but with some limitations. Primarily, the court rejected Frank’s argument that ERISA prohibited the Government from taking his retirement funds to pay restitution obligations. The court held that the ERISA “anti-alienation provision” that is designed to protect retirement benefits from third parties had to give way to the provision of the Mandatory Victims Restitution Act that courts “shall order” payment “notwithstanding any other provision of law.” However, that does not mean that the Government could access all the funds immediately. Rather, the regular tax collection provisions that would apply if Frank were to withdraw the funds himself applied to the Government’s withdrawal of the funds. In other words, the Government stood in the same position as Frank himself when it came to penalties and restrictions on accessing the 401(k) funds. The court remanded to the district court to consider how those provisions applied factually to Frank’s case.

No comments: