A Bad Deed is Not Entirely Unpunished
Richard Thomas embezzled nearly $20,000,000 from his employer. The employer then kept Thomas’s profit sharing account of about $21,000 as an offset against the embezzled amount. Of course, this violated ERISA’s anti-alienation provisions. Thomas sued his former employer for the money and won.
To add to the employer’s misery, Thomas then sued to recover his attorneys’ fees. The case does not indicate the amount but says that the amount embezzled is hundreds of times more than the amount of the attorneys’ fees sought.
Courts are permitted to award attorneys’ fees to those who win ERISA cases and Thomas had won his case. The court evaluated the five factors typically used to decide whether to award fees and found that they slightly favored Thomas’s request. Nevertheless, the court refused to award attorneys’ fees, finding that stealing almost $20,000,000 that the participant will probably never be able to repay is a special circumstance that renders an award of attorneys’ fees to that participant unjust. Thus, the court did not add insult to the former employer’s injury and did not award Thomas his fees.
The president of the company had been found personally liable for the unpaid profit sharing account. The president would also have been personally liable for the attorneys’ fee award. Although the president did not have to pay for Thomas’s attorneys, the president undoubtedly had to pay his own counsel a substantial amount to fight the initial lawsuit and the attorneys’ fees request. The moral of the story is that an employer should not use qualified plan accounts to offset debts owed by the employee to the employer.
Contact Benefits Notes for more information.