Court: District Court, E.D. Virginia; November 19, 2012; Federal District Court
Mary Angela Herrmann pled guilty to wire fraud and was sentenced to 21 months in prison, followed by three years of supervised release. She was ordered to pay restitution of $231,035.91 to her employer, General Dynamics Advanced Information Systems (GDAIS), and a special assessment of $100. If restitution was not paid immediately, she was to pay $150 monthly after release. Herrmann’s fraudulent activities, which occurred between December 2006 and April 2009, involved embezzling a total of $239,035.91 by making unauthorized payments to her personal accounts.
The government filed a motion for forfeiture of Herrmann's interest in an Employee Stock Ownership Plan (ESOP) valued at approximately $82,253.15 after she failed to make restitution payments. Herrmann contested the forfeiture, claiming it was barred by the Employee Retirement Income Security Act (ERISA) and the ESOP plan terms. Despite her claims, the U.S. sought forfeiture as a substitute asset under 21 U.S.C. § 853, emphasizing that criminal forfeiture serves as a deterrent to crime and reflects Congress's intent that crime should not be profitable. The court had previously entered a consent order for forfeiture and a restitution judgment for the full amount owed to GDAIS.
Forfeitable assets may be transferred or dissipated, prompting Congress to allow the government to seek forfeiture of substitute property up to the value of the original assets under 21 U.S.C. § 853(p)(2). In this case, the government aims to forfeit the defendant's interest in an Employee Stock Ownership Plan (ESOP) as a substitute asset. However, ERISA’s anti-alienation and assignment provision (29 U.S.C. § 1056(d)(1)) prohibits the assignment or alienation of benefits from pension plans, which includes the defendant’s ESOP. It is established that forfeiture constitutes an alienation of plan interest, thus ERISA's provision clearly bars any civil or criminal forfeiture of such interests.
While no Supreme Court or binding circuit authority directly addresses this issue, analogous Supreme Court rulings suggest that ERISA's provision prevents criminal forfeiture. In Guidry v. Sheet Metal Workers National Pension Fund, the Court rejected a union's attempt to impose a constructive trust on pension benefits of an embezzling official, emphasizing that the anti-alienation provision is a deliberate congressional policy choice to protect pensioners' income. The Court stated that any exceptions should be made by Congress, which has not done so in ERISA or the criminal forfeiture statute. Despite differences in factual context from Guidry, the underlying principle applies, reinforcing that ERISA pension plans are exempt from forfeiture. This interpretation is supported by decisions from the Second Circuit and various district courts affirming that ERISA's provisions prohibit civil or criminal forfeiture of un-distributed pension plan funds, as demonstrated in United States v. All Funds Distributed o/b/o to Weiss.
In United States v. Jewell, the court affirmed that ERISA's anti-alienation and assignment provisions do not allow for exceptions based on inequitable or criminal conduct, thereby protecting pension plan benefits from forfeiture unless explicitly stated by Congress. Similarly, previous cases, such as United States v. Hargrove and United States v. Norton, reinforced that ERISA prohibits criminal forfeiture of pension plans. The government’s arguments for forfeiture of the defendant's ESOP interest were unconvincing. The government claimed its forfeiture order would not lead to premature withdrawal of funds, referencing Weiss, but this was rejected as it resembled a constructive trust disallowed in Guidry. The Union's request for a constructive trust to redirect benefits was also found to conflict with ERISA protections. The government further contended that circuit court rulings on IRAs and life insurance annuities supported its position; however, these cases involved accounts not covered by ERISA's provisions. Additionally, the government argued that the criminal forfeiture statute created an exception to ERISA, but this was dismissed due to the lack of an irreconcilable conflict between the two statutes. Lastly, the government suggested that a court could order the forfeiture of any funds received from the ESOP under 21 U.S.C. § 853(e), but this was also unconvincing given ERISA's protections.
Section 853(e) is specifically limited to the pre-conviction protection of forfeitable assets, allowing courts to issue restraining orders only before or upon the filing of an indictment. It does not allow for post-trial protective measures. Since the government did not identify any statutory basis for a post-conviction protective order, the court deemed it inappropriate to issue one. The ruling is narrow, asserting that ERISA’s anti-alienation provision prevents the government from criminally forfeiting a defendant’s interest in an ERISA-protected Employee Stock Ownership Plan (ESOP). The document clarifies that it does not address whether a different outcome could arise from a writ of garnishment under the Mandatory Victim Restitution Act or a restraining order under the All Writs Act, as those arguments were not presented. It defines a pension plan under ERISA and emphasizes that the anti-alienation provisions do not apply to IRAs or life insurance annuities. Courts interpret these provisions broadly to prevent defendants from undermining the impact of potential criminal forfeiture. The excerpt also notes the principles of implied repeal, emphasizing the need for clear legislative intent for such a repeal to be recognized.
21 U.S.C. § 853(e)(4) allows for pretrial restraining orders, though no case has been identified addressing its application in a post-conviction context. The Mandatory Victims Restitution Act (MVRA) is recognized by courts as an exception to the Employee Retirement Income Security Act's (ERISA) anti-alienation provisions, asserting its applicability despite conflicting federal laws. Relevant case law confirms this, including United States v. Irving, United States v. Novak, and United States v. James, which highlight the MVRA's precedence over tribal law and conflicting statutes. Additionally, the All Writs Act may empower district courts to issue restraining orders, as evidenced in United States v. Ageloff and United States v. Yielding, which upheld the use of restraining orders to preserve assets pending restitution claims. Courts have also issued orders to prevent the concealment or depletion of a defendant's assets, as shown in United States v. Abdelhadi.
