ERISA’s anti-alienation provisions generally serve to protect/shield retirement assets from garnishment—there is, however, an exception—and Evan Greebel just found out the hard way.
In 2017, Evan Greebel was convicted of Conspiracy to Commit Wire Fraud and Conspiracy to Commit Securities Fraud as a result of his conspiring with co-defendant Martin Shkreli and others to defraud investors in Retrophin, Inc. Those actions took place while Greebel was a partner at the law firm Katten Muchin Rosenman LLP and served as Retrophin’s outside counsel. In August 2018, the district court sentenced Greebel to pay restitution to his victims in the amount of $10,447,979, which was “due and payable immediately from available assets . . . until paid in full,” in accordance with the Mandatory Victims Restitution Act (MVRA).
The United States Government sought to enforce Greebel’s restitution order under the MVRA by garnishing approximately $921,000 contained in Greebel’s retirement accounts—and the U.S. District Court for the Eastern District of New York subsequently approved the Government’s application for writs of garnishment seeking access to defendant’s 401(k) retirement accounts. This appeal (United States v. Greebel, 2d Cir., No. 21-993, 8/24/22) arises out of the Government’s effort to garnish two of Greebel’s retirement accounts to enforce his restitution order under the MVRA.
The Appeal
The court here—Judge Richard C. Wesley, with Judges Joseph F. Bianco and Myrna Pérez joining in the opinion—began by laying out the statutory provisions at issue in this case, specifically the MVRA’s restitution requirement and procedure for enforcement, ERISA’s prohibition on disbursing retirement funds to third parties, and the CCPA’s cap limiting garnishment of earnings. As it turns out, the Second Circuit had already concluded that the MVRA permits courts to consider ERISA-protected assets when imposing criminal fines—and, according to the opinion, “two other courts of appeals have similarly held that the MVRA permits the garnishment funds otherwise covered by ERISA’s anti-alienation provision.” In fact, Judge Wesley said that “the statutory text of the MVRA makes clear that criminal restitution orders can be enforced by garnishing ERISA-protected retirement funds.”
That said, Judge Wesley noted that that determination wasn’t enough to “end the inquiry,” but that “the relevant question becomes, what is the defendant’s “property” interest in his 401(k) account?” In other words, while the MVRA allows the government to garnish the account, it could not obtain greater access to those funds than did the participant himself. Said another way, “the Government’s right to Greebel’s 401(k) retirement accounts is the same as those of Greebel himself.”
‘Tortured Contract Interpretation’
However, “in the face of this straightforward statutory construction, Greebel clings to language in Novak that restitution orders can be enforced by garnishing ERISA-protected retirement funds only “when the defendant has a current, unilateral right to receive payments under the terms of the retirement plan,” Judge Wesley wrote.
“From this premise, Greebel offers a series of tortured contract interpretations to argue that he does not have a current unilateral right to withdraw his ERISA-protected funds and thus, his accounts are not subject to garnishment by the Government.” That said, Judge Wesley continued to note that, “neither the relevant statutory provisions nor the plan documents support Greebel’s argument that he currently lacks the right to withdraw a lump-sum distribution from his retirement accounts.”
More specifically, while Greebel argued that he lacked access to these funds (relying on a withdrawal provision that limited his access until age 62 unless he requested withdrawal within 180 days of termination), Judge Wesley noted that, “The text will not do the work he asks of it”—finding nothing in the plan document that the right to access the account “accrues upon his separation from 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—basically that the plan’s provisions requiring that he apply to have his funds distributed, and submit a request in accordance with certain procedures, negate his unilateral right to receive payments.” Basically, he had argued that, in the absence of spousal consent, the plan’s administrative procedures precluded his withdrawal of the funds.
‘Unambiguous Plain Language’
But Judge Wesley noted that “the unambiguous plain language of the plan documents confirms Greebel’s rights to withdraw his funds ‘up to the entire value,’ of his accounts,” and that his right to do so “does not exist only when he is able to single-handedly receive money immediately upon verbal command….” Greebel also (unsuccessfully) contended that the plan’s SPD precluded his withdrawal of funds prior to age 59 ½—basically arguing that because of provisions that cautioned about the imposition of a 10% penalty on withdrawals prior to that age that that meant he was not therefore able to have unimpeded access to the account.
While the court held that the Mandatory Victims Restitution Act authorizes garnishment of defendant’s 401(k) retirement funds, they sent it back to the district court to determine whether the 10% early withdrawal tax will be imposed upon garnishment—oh, and they also held that the Consumer Credit Protection Act’s 25% cap on garnishments does not apply to limit the Government’s garnishment.
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