Theft or Embezzlement from Employee Benefit Plans - 18 U.S. Code § 664
An embezzlement is a criminal act in every state, and most acts of embezzlement are prosecuted under state laws. However, in certain instances, acts of embezzlement fall under the federal government's jurisdiction and are charged as federal crimes.
For example, if you are accused of embezzling from an employee benefit plan, you will be charged with a federal crime under Title 18 U.S.C. 664. If convicted, you could face up to five years in federal prison.
Embezzlement is a serious crime involving stealing or the unlawful use of money or property by someone entrusted with the care or control of that money or property. In other words, property theft occurs when someone authorized to manage the money or property steals it for personal gain.
18 U.S.C. 664 says, “Anyone who embezzles, steals, or unlawfully and willfully abstracts or converts to their use or the use of another any of the money, funds, securities, premiums, credits, property, or other assets of any employee welfare benefit plan or employee pension benefit plan, or any fund connected therewith, will be fined or imprisoned up to five years, or both.”
The term “any employee welfare benefit plan or employee pension benefit plan” means any employee benefit plan under title I of the Employee Retirement Income Security Act of 1974. Our federal criminal defense attorneys will examine this statute further below.
18 U.S.C. 664 Explained
Why is embezzling a company's employee benefit plan a federal crime?
The answer is that employee benefit plans are governed by the Employee Retirement Income Security Act (ERISA).
ERISA is a federal law that sets standards for private pension and health plans and is administered by the Department of Labor and the Department of Treasury. As a result, these plans fall under the federal government's jurisdiction, even though they may be privately funded.
Specifically, 18 U.S.C. 664 makes it a crime for anyone who "embezzles, steals, willfully abstracts or converts to his use, any of the money, funds, securities, premiums, credits, property, or other assets of any employee welfare benefit plan or employee pension benefit plan."
What Are Some Examples?
EXAMPLE 1: Arnold works in the financial department of a large firm. His job is to administer the pension plans of thousands of employees, the funds of which are spread among a portfolio of low-risk stocks and mutual funds.
Systematically, Arnold begins transferring shares from these investments into his name. Arnold is guilty of a federal crime under 18 U.S.C. 664 because he is directly embezzling out of employee pensions rather than the company's other accounts.
EXAMPLE 2: Samantha works in a company's accounting department that has set up optional 401-k plans that their employees can pay into. Part of her job is to process the employee's share of the payments into these savings plans.
Samantha begins diverting some of these premium payments from other employees into her 401-k. Samantha is guilty under 18 U.S.C. 664 because the employee payments are designated for employee benefit plans.
EXAMPLE 3: Sam does some voluntary bookkeeping work for his church, which maintains a retirement fund for specific staff members. Sam begins diverting money out of this retirement fund for his use.
While Sam can be charged under state embezzlement laws, he will NOT be charged under 18 U.S.C. 664 because church employee benefit plans are not within the jurisdiction of ERISA.
What are the Related Offenses?
Title 18, Chapter 31 of the United States Code list numerous statutes that cover different types of federal embezzlement offenses, such as the following:
- Embezzlement of public money, property, or records (Title 18 U.S.C. 641): Stealing or diverting any money or other items of value belonging to the United States government,
- Embezzlement of tools and materials for counterfeiting purposes (Title 18 U.S.C. 642): Stealing or diverting parchment, paper, or tools that can be used to illegally stamp or print any kind of bill, note, stamp, coupon, etc., circulated by the U.S. government.
- Theft or bribery concerning programs receiving federal funds (Title 18 U.S.C. 666): Embezzling or stealing from any agency or organization that receives at least $10,000 of federal funds within a year,
- Accounting for public money – 18 U.S.C. 643,
- Banker receiving a deposit of public money – 18 U.S.C. 644,
- Custodians misusing public funds - 18 U.S.C. 648,
- Disbursing officer falsely certifying full payment – 18 U.S.C. 651,
- Theft, embezzlement by bank officer - 18 U.S.C. 656,
- Lending, credit, and insurance institutions – 18 U.S.C. 657,
- Interstate or foreign shipments by carrier - 18 U.S.C. 659,
- Theft or bribery concerning federal funds - 18 U.S.C. 656,
- Theft or embezzlement involving health care – 18 U.S.C. 669.
What are the Penalties for 18 U.S.C. 664?
Maximum sentencing for 18 U.S.C. 664 violations is pretty straightforward.
For any act of embezzling or stealing from employee benefit plans, you face a maximum of 5 years in federal prison if convicted and a fine of up to $500,000.
What are the Common Defenses?
A few common defenses can be raised in response to embezzlement charges from employee benefit plans under 18 U.S.C. 664. These are discussed below.
Perhaps we can argue there was a lack of intent. To be convicted of this federal crime, the prosecution must show that you willfully stole and that you intended to commit the act of embezzlement.
If you can show that you did not have the required criminal intent (for example, you were unaware that you were mishandling employee benefit funds), you may be able to avoid a conviction.
Perhaps we can argue a mistake of fact. If you can show that you reasonably believed that you were entitled to the money or property in question, you may be able to avoid a conviction.
If you are facing federal embezzlement charges, we will need to show that there is some other explanation for the evidence presented by the prosecution. Perhaps there is insufficient evidence to convict you beyond a reasonable doubt.
Perhaps we can prove entrapment by federal agents that show they unlawfully persuaded you to commit a crime you would have otherwise not committed.
Negotiation with the federal prosecutor may be possible for a favorable plea bargain.
The criminal defense law firm of Eisner Gorin LLP is based in Los Angeles. You can contact us for an initial case review by phone or use the contact form.