Criminal ERISA Investigations Targeting Multiemployer Retirement Plans (MEPs)
As explained by the Pension Benefit Guaranty Corporation (PBGC), “[a] multiemployer plan is a collectively bargained plan maintained by more than one employer, usually within the same or related industries, and a labor union. These plans are often referred to as ‘Taft-Hartley plans.’” Multiemployer plans can often be cost-effective options for companies that want to offer attractive retirement savings opportunities to a relatively small number of employees, and they are particularly common in the construction, transportation, entertainment, mining, manufacturing, and retail industries.
Like other retirement plans, multiemployer retirement plans (MEPs) are governed by the Employee Retirement Income Security Act of 1974 (ERISA). ERISA imposes a host of obligations on MEP plan managers, administrators, and trustees; and, in many cases, failing to meet these obligations can lead to federal criminal charges. In order to avoid the risk of substantial fines, disqualification from serving multiemployer retirement plans, and federal imprisonment, MEP plan managers and others must ensure that they have a comprehensive understanding of the relevant provisions of ERISA; and, in the event of a U.S. Department of Labor (DOL) or U.S. Department of Justice (DOJ) investigation, they must be prepared to defend themselves effectively.
Multiemployer Retirement Plans: Understanding Your Obligations Under ERISA
ERISA is an extraordinarily-complex statute that includes numerous provisions that apply to multiemployer retirement plans. This includes provisions of general applicability as well as provisions that are specific to MEPs. Some of the key provisions of ERISA that govern the management and distribution of participant funds held in multiemployer retirement plans include:
1. Joint Management (but Individual Responsibility)
Multiemployer retirement plans will generally be managed by a board of trustees consisting of management and labor members. Management members include representatives of the employers whose employees are participating in the plan, and labor members include trustees selected by the employee union. This joint management structure is designed to minimize the risk of improper management of MEP assets; however, all individual trustees remain personally responsible for ensuring their own compliance with ERISA’s criminal provisions.
2. Fiduciary Duty
All trustees of multiemployer retirement plans have a duty to manage plan assets for the sole and exclusive benefit of plan participants. This is known as a “fiduciary duty.” While administration costs can generally be paid using plan assets, any payments made to trustees or their related entities are likely to draw scrutiny in the event of a federal investigation. Investment decisions must also be made with plan participants’ interests in mind and are subject to the general investment provisions of ERISA.
3. Plan Structuring and Portability
Multiemployer retirement plans are subject to general and MEP-specific structuring rules under ERISA. Special portability rules apply to MEPs as well. As explained by the PBGC:
“Multiemployer plans are subject to many of the vesting, accrual, and minimum participation rules that apply to single-employer plans. However, there are differences in plan design. Many multi-employer plans are ‘unit benefit’ plans that offer a specified dollar-amount benefit per month multiplied by years of credited service. Some plans offer a choice of enhanced benefits to employees whose employers agree to pay higher contributions.
“In addition, multi-employer plans offer portability — participants retain service if they switch employment from one contributing employer to another within the same plan. . . .”
For plan managers and trustees, ensuring compliance with all applicable rules is crucial to avoiding criminal prosecution in the event of a DOL or DOJ investigation. Denying participants access to vested funds, failing to accurately apply the unit benefit rules (if they apply), and wrongfully denying portability of plan assets are all examples of ERISA violations that have the potential to lead to criminal charges. Ignorance of the law is not a defense, and attempting to act in good faith without an adequate understanding of the law may not be enough to protect you against prosecution.
4. Employer Contributions (and MEP Enforcement)
Employers participating in multiemployer retirement plans have an obligation under ERISA to make their contributions on time. Failure to make contributions can lead to employer liability, and plan trustees may have an obligation to enforce the employer’s obligations on behalf of participating employees through formal legal means.
5. Recordkeeping, Reporting, and Disclosure
All employer-sponsored retirement plans (including single-employer and multiemployer plans) are subject to comprehensive and stringent record-keeping, reporting, and disclosure requirements under ERISA. While falsifying records or concealing information in violation of these requirements can lead to criminal prosecution, so can other, less-malevolent violations. Under Section 501 of ERISA, willful reporting and disclosure violations can carry fines of up to $100,000 and up to 10 years of federal imprisonment.
Examples of Criminal ERISA Enforcement Cases Involving Multi-employer Retirement Plans
As a result of the breadth and specificity of ERISA’s provisions governing multiemployer retirement plans, criminal investigations targeting plan managers and trustees can involve a wide range of allegations. The following are a few examples of recent criminal ERISA enforcement cases targeting illegal acts affecting MEPs (Oberheiden, P.C.’s attorneys did not serve as defense counsel in any of the cases discussed below):
- Union Trustee Sentenced for Falsifying MEP Expense Records – A union trustee was sentenced for submitting false reimbursement requests for approximately $12,000 in expenses incurred on the MEP’s behalf. As a result of his conviction, the defendant is also prohibited from serving “in any capacity relating to any employee benefit plans under ERISA jurisdiction” for 13 years.
- Union Officer Found Guilty of Embezzling Over $300,000 from MEP – A union officer pled guilty to three counts of embezzling and aggravated identity theft in relation to allegations that he paid himself an excessive salary and stipend using funds from a multi-employer retirement plan. Penalties for these offenses include substantial fines and two to five years of imprisonment for each offense.
- Screen Actors Guild (SAG) Executive Pleads Guilty to Pension-Related Tax Fraud – A former Chief Information Officer (CIO) of the Screen Actors Guild (SAG) Producers Pension and Health Plan pled guilty to federal tax fraud in relation to a scheme through which he personally profited from contracts with vendors providing services to the plan. In announcing the plea, the U.S. Attorney handling the case stated, “Individuals entrusted with the pension and healthcare funds of others must be held to the highest standard of conduct. The [DOJ] will do everything within its power to bring to justice those who abuse a position of trust for personal gain.”
What to Do When Targeted in a Criminal ERISA Investigation Involving an MEP
When targeted in a criminal investigation under ERISA, acting promptly is one of the key steps involved in avoiding unnecessary consequences. Plan managers, trustees, company executives, and other individuals who are contacted by DOL or DOJ agents in relation to their involvement with a multi-employer retirement plan must quickly focus their efforts on doing everything in their power to avoid federal charges. This includes:
- Avoid Direct Communication with Federal Agents – What starts out as a seemingly-harmless inquiry or “interview” could quickly turn into a dangerous interrogation. When you are contacted by federal agents, you are not required to answer their questions, and doing so could significantly impair your ability to assert a successful defense. Let the agents know that you are exercising your right to legal representation and then contact a federal criminal defense lawyer immediately.
- Speak with a Federal Criminal Defense Lawyer – Engaging defense counsel as early in the investigative process as possible can greatly reduce your risk of being charged with a crime under ERISA. An experienced federal criminal defense lawyer will be able to communicate with the DOL and DOJ on your behalf, identify all available defenses, and execute a strategy focused on securing a favorable result as efficiently as possible.
- Make Informed Decisions about Next Steps and Remedial Measures – Some ERISA violations are capable of being remedied (such as reporting and disclosure violations); however, remedying a violation during a federal investigation can have a variety of potential pitfalls. Regardless of what it is in your interests to do next, you need to make informed decisions; and, once again, this requires the advice and counsel of an experienced federal criminal defense lawyer.
At Oberheiden, P.C., our federal defense attorneys offer centuries of combined experience in high-stakes criminal cases. Several of our attorneys are former DOJ prosecutors, and to date we have handled federal cases as defense counsel in more than 40 states across the country. If you are being targeted for MEP fraud or any other crime under ERISA, we can help you, but only if you get in touch. To put our team to work building your defense immediately, request a free initial case assessment today.
Contact the Federal Criminal Defense Lawyers at Oberheiden, P.C.
For more information about our firm’s federal criminal defense practice or the risks involved in being targeted in a criminal ERISA enforcement investigation, please contact us immediately to schedule your free initial case assessment. To speak with a member of our federal defense team in confidence, call 888-680-1745 or get in touch online now.
Dr. Nick Oberheiden, founder of Oberheiden P.C., focuses his litigation practice on white-collar criminal defense, government investigations, SEC & FCPA enforcement, and commercial litigation.