ERISA Theft: Executives Found Criminally Liable
There is certainly a lot of discussion recently about the relative health of the economy and corporations. In tough times, company executives might think about misusing benefit plan contributions to prop up a struggling company. Don't do it! ERISA theft can result in some serious consequences.
In US v. Jackson, the 4th Circuit upheld the 7-10 year prison convictions of two executives for ERISA theft. The CEO and CFO of the company were convicted based on their failure to make required contributions to the retirement plan and for using health plan contributions for purposes other than paying benefits. The executives deliberately withheld the plan contributions and then falsified plan records to cover up the missing contributions. In their defense, the executives said the company was indeed failing and that it did not have the resources to make the contributions. The Court was not swayed.
The Court in this case reaffirmed the position that plan assets are "assets of the plan" when they are due for contribution, not when they are actually contributed. So on the day the company was obligated to make its contributions, withholding was a breach of fiduciary duty. Moreover, direction of those assets to some other payment constituted theft and embezzlement from the plan, even though they did not personally profit. Regardless of other financial concern, then, it is extremely important for plan fiduciaries to remember to satisfy funding obligations and protect plan assets.
