ERISA’s anti-alienation provisions generally serve to shield/protect retirement assets from garnishment – there is an exception, however – and Evan Greebel just found that out the hard way.
In 2017, Evan Greebel was convicted of conspiracy to commit wire fraud and conspiracy to commit securities fraud following his conspiracy with co-defendant Martin Shkreli and others to defraud investors. of Retrophin, Inc. These actions took place while Greebel was a partner. at the law firm Katten Muchin Rosenman LLP and served as outside counsel for Retrophin. In August 2018, the district court ordered Greebel to pay his victims restitution in the amount of $10,447,979, which was “due and payable immediately out of available assets.” . . until paid in full,” according to the Mandatory Victims Restitution Act (MVRA).
The United States government sought to enforce Greebel’s restitution order under the MVRA by seizing approximately $921,000 contained in Greebel’s retirement accounts – and the US District Court for the Eastern District of New York subsequently approved the government’s request for garnishment writs requesting access to the defendant’s 401(k) retirement accounts. This call (United States against Greebel, 2d Cir., No. 21-993, 8/24/22) stems from the government’s effort to seize two of Greebel’s retirement accounts to enforce its restitution order under the MVRA.
The court here – Judge Richard C. Wesley, joined by Judges Joseph F. Bianco and Myrna Pérez – began by setting out the statutory provisions at issue in this case, in particular the restitution requirement and the procedure for enforcement of the MVRA, ERISA’s prohibition on disbursing pension funds to third parties, and the CCPA’s cap limiting income garnishment. It turns out that the Second Circuit had already found that the MVRA allowed courts to consider ERISA-protected assets when imposing criminal fines — and, according to the opinion, “two other courts of appeal also ruled that the MVRA allows garnishment funds.” otherwise covered by the anti-alienation provision of ERISA. In fact, Justice Wesley said, “The MVRA statute makes it clear that criminal restitution orders can be enforced by seizing ERISA-protected retirement funds.”
That said, Judge Wesley noted that this determination was not sufficient to “terminate the investigation,” but that “the relevant question becomes, what is the defendant’s ‘ownership’ interest in his 401 account ( k)?” In other words, although the MVRA allows the government to seize the account, it could get no better access to these funds than the participant themselves. In other words, “the government’s interest in Greebel’s 401(k) retirement accounts is the same as that of Greebel itself.”
“Tortured contract interpretation”
However, “in the face of this straightforward statutory interpretation, Greebel clings to Novak’s language that restitution orders can only be enforced by seizing ERISA-protected retirement funds” when the defendant has a present and unilateral right to receive payments under the terms of the pension plan,” Judge Wesley wrote.
“From this premise, Greebel offers a series of tortured contract interpretations to assert that it does not currently have a unilateral right to withdraw its ERISA-protected funds and therefore its accounts are not subject to government garnishment.” That said, Justice Wesley went on to note that “neither the relevant statutory provisions nor the plan documents support Greebel’s argument that he is not currently entitled to withdraw a lump sum distribution from his retirement accounts.” .
Specifically, while Greebel argued that he did not have access to these funds (relying on an opt-out provision that limited his access until age 62 unless he requested the opt-out within 180 days of termination), Judge Wesley noted that “the text won’t do the job.” he asks” – finding nothing in the plan document that the right to access the account “acquires upon his termination of employment. Nothing in Section 6.01 limits the time within which he is entitled to a distribution. »
Greebel made similar arguments regarding his account balance in the Katten plan – essentially that the plan’s provisions requiring him to request distribution of his funds and submit a request in accordance with certain procedures, nullify his unilateral right to receive payments. . Essentially, he had argued that, in the absence of spousal consent, the plan’s administrative procedures prevented his withdrawal of funds.
“Plain language without ambiguity”
But Judge Wesley noted that “the plain and unambiguous language of the plan documents confirms Greebel’s rights to withdraw its funds ‘up to the full value’ of its accounts, and that its right to do so” does not exist only when he is able to receive money on his own immediately on verbal command…”. Greebel also argued (unsuccessfully) that the plan’s SPD prevented his withdrawal of funds before the age of 59½ – essentially arguing that because of the provisions that warned against imposing a penalty of 10 % on withdrawals before this age meant that he was therefore not able to freely access the account.
While the court ruled that the Mandatory Victim Restitution Act allows garnishment of the defendant’s 401(k) retirement funds, they remanded it to the district court to determine whether the $10 early withdrawal tax % will be imposed on garnishment oh, and they also held that the Consumer Credit Protection Act’s 25% cap on garnishments does not apply to limit government garnishment .