Prison Time for 401(k) Misdeeds

By: Colleen Wilson, email cwilson@cbginc.com

We assist many clients in resolving issues that result from the failure to timely deposit 401(k) deferrals into the trust of the plan. Most employers who fail to timely deposit do so because of oversight or mistake. We encourage any employer who fails to timely deposit 401(k) deferrals to correct the matter promptly.

The importance of timely depositing 401(k) deferrals can be illustrated in a recent case involving a Fort Worth, Texas company. The company’s president admits that in 1997 he instructed the company’s comptroller to stop remitting 401(k) deferrals to the plan. Instead, 401(k) deferrals totaling $107,000 remained in the company’s account and were used to pay business expenses as well as personal expenses of the president. Then, the company filed for bankruptcy.

In August, 2003, the U.S. District Court for the Northern District of Texas found that the company’s president “intentionally and willfully” directed the funds for personal and business use. The Court found him guilty of theft and embezzlement and sentenced him to 21 months in prison and also ordered the payment of $52,469 in restitution. The remainder of the funds were already paid to the plan by the plan trustee.

Published: 10/24/2003