In United States v. Greebel, 21-993-cr (2d Cir. Aug. 24, 2022), the Second Circuit holds that the Mandatory Victims Restitution Act (MVRA) enables the government to garnish a defendant’s retirement accounts to pay restitution.
Defendant Greebel was convicted of conspiracy to commit wire fraud and securities fraud and ordered to pay over $10 million in restitution. Pursuant to this restitution order, the government tried to garnish two of his 401(k) retirement accounts. The defendant objected. The Circuit found that these accounts’ plans permitted the defendant himself to withdraw lump-sums. And because the MVRA empowered the government to reach any property “in which the debtor has a substantial nonexempt interest,” allowing the government to “step[] into the defendant’s shoes, acquiring whatever rights the defendant himself possesses” to property, the funds were fair game for the government.
In so holding, the Circuit addressed a potential conflict between the MVRA and the Employee Retirement Income Security Act of 1974 (ERISA), which “broadly protects covered retirement benefits from dissipation through payment to third parties.” The Circuit noted MVRA provisions that expressly allow enforcement of restitution orders against “all property or rights to property” of a defendant, “[n]otwithstanding any other Federal law,” 18 U.S.C. § 3613(a). This MVRA statutory text “makes clear that criminal restitution orders can be enforced by garnishing ERISA-protected retirement funds.”
In addition, the Circuit had previously held that courts could consider ERISA-protected assets when imposing criminal fines, and other circuits have held that ERISA-protected assets can be garnished for restitution payments.
But it’s not all good news for the government! Like the defendant himself, the government may have to pay a tax penalty for early withdrawal of funds. The Circuit remands so the district court can consider this question in the first instance.
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