In United States v. Shkreli, No. 21-993, __F.4th__, 2022 WL 3640279 (2d Cir. Aug. 24, 2022), Defendant-Appellant Evan Greebel, co-conspirator of Martin Shkreli, was ordered to pay over ten million dollars to his victims, investors in Retrophin, Inc., following his convictions for conspiracy to commit wire fraud and securities fraud. The Government sought to garnish roughly $921,000 contained in two retirement accounts, including his 401(k)-retirement account at Merrill Lynch from the time he worked as an associate at the Fried Frank law firm and his 401(k)-retirement account at Charles Schwab from his time working at the Katten Muchin Rosenman law firm. The district court granted the Government’s application for writs of garnishment under the Mandatory Victims Restitution Act (“MVRA”), not withstanding the Employee Retirement Income Security Act of 1974 (“ERISA”)’s anti-alienation provision. The Second Circuit agreed with the district court.
In coming to this conclusion, the Second Circuit first determined that the MVRA permits garnishment of funds otherwise protected by ERISA’s anti-alienation provision. The Government may enforce restitution orders from criminal convictions using the practices and procedures for enforcement of a civil judgment under federal or state law as set forth in the Federal Debt Collection Procedures Act. While ERISA broadly protects retirement benefits from dissipation through payment to third parties—it’s anti-alienation provision—the MVRA permits courts to consider ERISA-protected assets when imposing criminal fines. The MVRA specifically carves out four types of federal authorized pensions, which also include anti-alienation provisions, but it does not carve out ERISA-protected 401(k) accounts. Congress’s express exclusion of these retirement plans signals that their anti-alienation provisions would not have protected them from garnishment under the MVRA. If the general anti-alienation provisions were sufficient to bar garnishment under the MVRA then there would be no reason to carve out certain retirement plans.
Once it is determined that the Government can garnish ERISA-protected retirement funds, the next question is what is the defendant’s property interest in his account? The court found that the 401(k) plan documents gives Greebel the right to withdraw funds in his retirement account. To enforce restitution under the MVRA, the Government steps into the shoes of the defendant and acquires the rights the defendant possesses with respect to the balance of the 401(k) accounts. The court remanded to the district court to determine whether the Government’s right to the funds is limited by the ten-percent early withdrawal tax, and if so, the amount subject to garnishment. The court also held that the CCPA’s garnishment cap does not apply to limit the Government’s right to a lump-sum distribution of his retirement funds since they do not qualify as “earnings.”
LEAVE YOUR MESSAGE
We know how to get your insurance claim paid. Call today at: