When an employer embezzles funds from an employee retirement benefit and/or health plan as defined by the Employee Retirement Income Security Act of 1974 (ERISA), it constitutes a severe federal offense under 18 U.S.C. § 664. A conviction under this statute can result in up to 5 years in federal prison.
ERISA establishes minimum standards for most private-sector retirement and health plans to protect participants and their beneficiaries.
The federal government aggressively prosecutes the misuse of these employee retirement and welfare funds, targeting anyone with access to these accounts.
If you're accused of ERISA embezzlement under U.S.C. § 664, your best chance of minimizing your legal exposure and obtaining the best possible outcome is with the help of an experienced federal criminal defense team.
At Eisner Gorin, LLP, our experienced attorneys take a comprehensive approach to these complex cases, advocating aggressively on your behalf from end to end to reduce your risks and protect your freedom and reputation. Schedule your consultation by calling (818) 781-1570 or using the contact form.
What Is ERISA Embezzlement Under 18 U.S.C. 664?
ERISA embezzlement occurs when someone knowingly and willfully steals, diverts, or misappropriates funds from an employee benefit plan.
ERISA affords specific protections to employee retirement, welfare, and health benefit plans in the private sector.
Federal law strictly prohibits the unauthorized use or theft of assets belonging to these plans. If you knowingly and willfully divert these funds for unapproved purposes, you can be charged under 18 U.S.C. 664, a federal crime.
To convict you of ERISA embezzlement, federal prosecutors establish the following elements beyond a reasonable doubt:
- The funds belonged to an employee welfare benefit plan or pension benefit plan subject to the protections of ERISA.
- The money, funds, securities, premiums, or other property in question rightfully belonged to the plan.
- You intentionally misused those funds for unauthorized purposes, converting them for your own use or the use of another.
Under this law, any person who has access to or control over plan assets may face prosecution. This includes business owners, corporate executives, payroll managers, and third-party administrators who handle plan funds.
What Types of Actions are Considered “Embezzlement” Under ERISA?
Typical actions that trigger charges of ERISA embezzlement include:
- Diverting employee contributions for personal use
- Using plan funds to cover general business expenses
- Failing to remit withheld payroll deductions to the proper benefit accounts
- Transferring plan assets to unauthorized third parties
Even temporary or “borrowed” use of plan funds can trigger charges if it violates fiduciary obligations.
Can I Be Charged with ERISA Embezzlement Even if I Intended to Repay the Money?
Yes, you can. Intent to repay is generally not a defense if the government can prove you knowingly used plan assets without authorization.
That said, evidence of intent to repay can still be relevant in plea negotiations, at sentencing, or to show a lack of criminal intent in certain contexts.
Do I Have to Be a Fiduciary to Be Charged Under 18 U.S.C. § 664?
No. While fiduciaries are common targets, any person with access to or control over plan assets can be charged with unauthorized use of ERISA-protected funds. This includes business owners, executives, payroll managers, or third-party administrators who handle plan funds.
What Penalties Could I Face for an ERISA Embezzlement Conviction?
A conviction under 18 U.S.C. 664 can result in up to five years in prison, substantial fines, and mandatory restitution of what was taken.
Federal prosecutors treat these embezzlement cases seriously and often pursue maximum penalties, which may include:
- Federal Prison: A conviction can result in up to five years in federal prison per count.
- Substantial Fines: Courts can impose fines of up to $250,000 per count.
- Mandatory Restitution: Defendants are legally required to repay the diverted funds to make the employee benefit plan whole again.
The specific penalties often depend on the total financial loss to the plan and the defendant's criminal history.
Also, under Federal Sentencing Guidelines, the amount of financial loss directly dictates the severity of the recommended prison sentence. A larger financial discrepancy generally results in a longer period of incarceration.
Federal Charges vs. Penalties Comparison Chart
| Federal Charge | Statute | Maximum Prison Sentence | Maximum Fines | Key Notes |
|---|---|---|---|---|
|
ERISA Embezzlement |
18 U.S.C. § 664 |
Up to 5 years per count |
Up to $250,000 |
Theft or misuse of employee benefit plan assets |
|
18 U.S.C. § 1343 |
Up to 20 years per count* |
Up to $250,000 |
Involves electronic communications (email, wire transfers) |
|
|
18 U.S.C. § 1341 |
Up to 20 years per count* |
Up to $250,000 |
Use of mail to execute a fraudulent scheme |
|
|
18 U.S.C. § 1027 |
Up to 5 years |
Up to $250,000 |
False filings or concealment in plan documents |
|
|
18 U.S.C. §§ 1956–1957 |
Up to 20 years |
Up to $500,000 or more |
Concealing or transferring illicit funds |
|
|
18 U.S.C. § 371 |
Up to 5 years |
Up to $250,000 |
Agreement to commit a federal offense |
|
|
18 U.S.C. § 1344 |
Up to 30 years |
Up to $1,000,000 |
Fraud involving financial institutions |
*Penalties for wire and mail fraud can increase to 30 years if a financial institution is involved.
Key Takeaways
- Federal prosecutors often stack multiple charges, significantly increasing exposure to prison time.
- Financial loss amount plays a major role under federal sentencing guidelines.
- Restitution is typically mandatory in financial crime cases.
- Even a single investigation can lead to multiple overlapping charges.
Related Federal Crimes and Charges
Wire Fraud (18 U.S.C. § 1343)
Wire fraud involves using electronic communications—such as emails, phone calls, or online transactions—to carry out a scheme to defraud. In ERISA-related cases, prosecutors may add wire fraud charges if plan funds were transferred electronically as part of the alleged misconduct.
Mail Fraud (18 U.S.C. § 1341)
Mail fraud occurs when the U.S. postal system or private mail carriers are used to further a fraudulent scheme. This charge may apply if documents, checks, or account statements related to benefit plans are sent through the mail as part of the alleged offense.
False Statements or Concealment of Facts (18 U.S.C. § 1027)
This offense involves making false statements or concealing material facts in documents required by ERISA, such as financial disclosures or plan reports. It is often charged alongside embezzlement when records have been altered or falsified.
Money Laundering (18 U.S.C. §§ 1956–1957)
Money laundering charges may arise when allegedly misappropriated funds are transferred through various accounts or transactions to conceal their origin. These charges can significantly increase potential penalties.
Conspiracy (18 U.S.C. § 371)
Conspiracy charges apply when two or more individuals agree to commit a federal offense and take steps toward carrying it out. In ERISA cases, multiple parties involved in handling plan funds may be charged together.
Bank Fraud (18 U.S.C. § 1344)
Bank fraud involves schemes to defraud financial institutions or obtain funds under false pretenses. If ERISA funds are tied to bank transactions or loans, this charge may be added.
Frequently Asked Questions About ERISA Embezzlement (18 U.S.C. § 664)
What is ERISA embezzlement under 18 U.S.C. § 664?
ERISA embezzlement is a federal offense that occurs when a person knowingly and willfully steals, diverts, or misuses funds from an employee benefit plan protected under the Employee Retirement Income Security Act (ERISA). These plans typically include retirement accounts, pensions, and employer-sponsored health benefits.
What are the penalties for ERISA embezzlement?
A conviction under 18 U.S.C. § 664 can lead to serious consequences, including up to five years in federal prison, significant fines of up to $250,000 per count, and mandatory restitution to repay the misused funds. The severity of the sentence depends on factors such as the amount of financial loss and the defendant's criminal history.
Can you go to jail for ERISA embezzlement?
Yes. ERISA embezzlement is a felony offense, and individuals convicted under this statute can face imprisonment. Courts are more likely to impose jail time in cases involving large financial losses, repeated violations, or clear evidence of intentional misconduct.
Is intent to repay a defense to ERISA embezzlement?
No, intent to repay the funds is generally not considered a valid legal defense. Even if you planned to return the money, you may still be charged if the funds were used without authorization. However, evidence of repayment may help during plea negotiations or sentencing.
Who can be charged under 18 U.S.C. § 664?
Anyone with access to or control over employee benefit plan funds may be charged. This includes business owners, corporate executives, financial officers, payroll personnel, and third-party administrators. You do not need to be a formal fiduciary to face charges.
What qualifies as an employee benefit plan under ERISA?
ERISA applies to most private-sector employee benefit plans, including 401(k) retirement plans, pension plans, and employer-sponsored health and welfare benefit programs. These plans are subject to strict federal regulations designed to protect employees and their beneficiaries.
What are common examples of ERISA embezzlement?
Examples of ERISA embezzlement include using employee retirement contributions for business expenses, failing to deposit payroll deductions into benefit accounts, or transferring plan assets to unauthorized individuals or entities. Even temporary misuse of funds can result in criminal charges.
What defenses are available for ERISA embezzlement charges?
Common defense strategies include demonstrating a lack of criminal intent, showing reliance on professional advice, disputing whether the funds qualify as ERISA-protected assets, and challenging the legality of how evidence was obtained during the investigation.
How do federal prosecutors prove ERISA embezzlement?
Prosecutors typically rely on financial records, audit findings, transaction histories, and witness testimony to prove that the defendant knowingly misused plan funds. They must establish intent and unauthorized use beyond a reasonable doubt.
When should you hire a federal defense lawyer?
You should contact a federal defense lawyer as soon as you become aware of an investigation or potential charges. Early legal representation can help protect your rights, guide your responses to investigators, and improve your chances of a favorable outcome.
What Are the Best Defenses Against 18 U.S.C. 664 Charges?
A successful defense strategy against ERISA embezzlement charges typically involves proving a lack of criminal intent, reliance on incorrect advice, and/or disputing that the assets in question meet the criteria for ERISA protections.
Defeating or mitigating federal embezzlement charges requires a meticulous examination of intent, procedural accuracy, and plan structure. A strong defense strategy challenges the prosecution's burden of proof at every level.
At Eisner Gorin, LLP, our federal criminal defense attorneys will leverage the following proven strategies, among others:
- Lack of Criminal Intent: Embezzlement requires the willful and knowing theft or reallocation of funds. We demonstrate that the misuse resulted from an honest misstep--for example, a misunderstanding of complex ERISA rules, an accounting mistake, or an administrative error.
- Reliance on Professional Advice: Business owners and executives often rely on outside counsel to manage benefit plans. Showing that you acted on the direct but ill-conceived guidance of accountants, attorneys, or benefits administrators can prove you lacked the intent to violate the law.
- Disputing Plan Asset Classification: ERISA regulations regarding what constitutes a "plan asset" are highly complex. We may argue that the specific funds in question did not technically qualify as plan assets at the time of the transfer.
- Challenging Evidence and Procedure: We will file motions to suppress evidence obtained through any unlawful searches or highlight procedural violations committed by law enforcement agents during the investigation.
Case Study: Defending a CFO Accused of "Borrowing" 401(k) Funds
Even temporary transfers of employee benefits to cover corporate expenses can result in federal prosecution. To illustrate, let's look at a hypothetical scenario involving a corporate officer facing charges for diverting 401(k) funds for 30 days.
The Premise
A company CFO faces a sudden, temporary corporate payroll shortfall. To ensure employees receive their paychecks on time, the CFO redirects withheld employee 401(k) contributions into the general operating account.
The CFO fully intends to replace the funds within 30 days once a pending, six-figure client invoice is paid.
During a random audit, federal regulators discover the discrepancy, and after an investigation, they determine that the temporary use of these assets constituted an unauthorized use of ERISA-protected funds. The CFO is charged with federal embezzlement under 18 U.S.C. § 664.
The Defense Strategy
Our legal team intervenes quickly to challenge the government's narrative of malicious theft. We put together an exact timeline that proves the transfer was temporary and highlights the pending client invoice as proof of intent to replenish the account.
By demonstrating that the CFO acted under immense pressure to save employee jobs rather than to enrich himself, we can reframe the context of the conversion to disprove criminal intent.
We back this claim with proof that the CFO fully restored the funds within 30 days and received no financial gain in the process.
The Outcome
While the CFO's actions technically violated federal regulations, our strategy of demonstrating good intentions enables our attorneys to negotiate with prosecutors to reduce the charges, ultimately securing a favorable plea agreement that helps the CFO avoid a lengthy federal prison sentence.
Protect Your Future and Your Freedom
Federal ERISA embezzlement under 18 U.S.C. § 664 is an aggressively prosecuted crime carrying severe penalties, including up to five years in federal prison and crippling financial restitution.
Under federal sentencing guidelines, even the temporary mismanagement of employee benefit funds can trigger federal charges. For this reason, hiring a highly skilled and experienced legal team is the best way to minimize your exposure and reduce the risk of severe sentencing and reputational damage.
At Eisner Gorin, LLP, our defense attorneys are highly experienced with complex cases like these, and we employ a multi-lawyer approach to ensure all legal bases of your defense are covered.
Eisner Gorin LLP is ready to assist you. Feel free to schedule your consultation today! Located in the heart of Los Angeles, we're here to support you every step of the way.
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