9th Circ. Rules Embezzler Lacked Standing Under ERISA to Challenge How Company Spends Her Restitution

A split three-judge panel of the U.S. Court of Appeals for the Ninth Circuit affirmed a federal district court’s decision that an embezzler lacked standing under ERISA to direct how her former employer spent restitution that she paid in an accompanying criminal case. The case is Colleen Lehr et al. v. Perri Electric Inc. et al., case number 19-17199, U.S. Court of Appeals for the Ninth Circuit.

In its unpublished memorandum, the Ninth Circuit panel stated that the former bookkeeper’s restitution payment, to which she and her husband stipulated in their bankruptcy proceedings, could not assert rights under ERISA to direct its allocation. If the couple had wanted to direct the allocation, the court continued, then they could have included such a provision in the stipulated bankruptcy judgment. The restitution amount far exceeded the retirement account balance that the former employee claimed to have.

The Lehrs, a married couple, were both beneficiaries of an ERISA-governed retirement plan through Colleen Lehr’s employment as a bookkeeper at her father’s family business for more than 30 years. The electrical contracting business fired Colleen after discovering accounting discrepancies. Colleen was later convicted of federal criminal violations and ordered to pay $326,000 in restitution. Colleen and her husband filed for bankruptcy, and the U.S. Attorney’s Office filed a claim for restitution. 

The Lehrs filed suit against the business, alleging that it breached ERISA by failing to deposit the restitution payments into the retirement plan. A California federal district court judge granted the business and the retirement plan’s motions for summary judgment on all claims. The Lehrs appealed to the Ninth Circuit. 

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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