Skip to page content
Employee Benefits Security Administration
DOL > EBSA > Newsroom > Fact Sheet

Fact Sheet

Contributory Plans Criminal Project

Printer Friendly Version

U.S. Department of Labor
Employee Benefits Security Administration
April 1, 2011

Background

  • Millions of American workers share in the costs of employee benefits by contributing to employer sponsored retirement and health benefit plans. In 2010, the Department of Labor's Employee Benefits Security Administration (EBSA) initiated the Contributory Plans Criminal Project (CPCP) to combat criminal abuse of contributory benefit plans.
  • The CPCP focuses on protecting employees who participate in all types of contributory plans - both pension and health.
  • Through the CPCP, EBSA is committed to punishing those who defraud these plans, and to deterring others who might contemplate such crimes. The participants in contributory plans are vulnerable to various forms of criminal abuse, so the CPCP was designed to address the panoply of relevant criminal violations.
  • There are a number of ways in which contributory plans can be vulnerable to criminal abuse. Employers, or others with authority over plan assets, may convert employee payroll contributions for their own personal use or they may misapply employee contributions to cover business expenses.
  • In the case of contributory retirement plans, such as 401(k) plans, the theft of plan assets can deprive employees of their hard-earned retirement savings. Misuse of employee contributions in contributory health plans can result in unpaid health benefits or insurance premiums, leaving workers suddenly without medical coverage.
  • Unscrupulous service providers may also target contributory benefit plans for their personal profit. EBSA has uncovered instances where third parties gained access to plan funds and siphoned off the money for their own financial gain. EBSA has uncovered instances where culprits have stolen participants' identity information to gain access to their employee benefit plan accounts.
  • EBSA works closely with other federal, state, and local agencies to enforce laws safeguarding contributory plan assets. Criminal prosecution of individuals who abuse their authority or control over contributory plans can result in severe criminal penalties, including imprisonment. Those convicted of embezzling or misappropriating moneys intended to fund pension plans or pay health benefits typically are barred from providing services or acting in any capacity for a period of 13 years.

EBSA Enforcement Efforts

As of March 31, 2011, under the CPCP, EBSA has:

  • Initiated 320 investigations
  • Referred 176 investigations to prosecutors
  • Obtained 41 indictments with 15 guilty pleas
  • Restored assets of $1,147,304

Recent Criminal Prosecutions

United States v. Delroy Sand, Jr. - On March 24, 2011, Delroy Joseph Sand, Jr. pleaded guilty in Federal District Court in Minnesota to one count of theft or embezzlement from an employee benefit plan, in violation of 18 U.S.C. § 664, for stealing $642,166.81 from the Hecla, Inc. Employees Retirement Savings Plan. Hecla, Inc. provided adult foster care as well as group home and mental health services in Minnesota. On March 30, 2011 the court ordered Delroy Sand removed as trustee of the plan and replaced him with an independent receiver. Sand, Hecla's founder and owner, was a licensed psychologist and longtime businessman active in Minnesota. On February 1, 2008, Sand appointed himself the retirement plan's trustee. He promptly began to steal from the plan, continuing until September 2009.

The criminal case was investigated by EBSA's Kansas City Regional Office and prosecuted by the United States Attorney's Office in Minneapolis, Minnesota.

United States v. Alexandria West - On December 22, 2010, Alexandria West pleaded guilty in federal district court to one count of theft or embezzlement from an employee benefit plan (18 U.S.C. § 664). West operated two businesses, the West Financial Group in Bethesda, Maryland, and West Pension Solutions in Towson, Maryland. Employees of the firms participated in the West Agency 401(k) Profit Sharing Plan, to which they contributed through payroll deductions. Between August 2008 and November 2009, Alexandria West failed to remit $76,608.66 in employee contributions to the plan, and instead used these funds for personal expenses. Twelve employees were affected.

The case was prosecuted by the United States Attorney's Office in Greenbelt, Maryland, and investigated by the Washington District Office of EBSA.

United States v. Sherry Lynn Hill - On December 13, 2010, in the Federal District Court for Northern District of West Virginia, Sherry Lynn Hill entered a plea of guilty to embezzlement of $31,766.20 from the Stinger Sheet Metal, Inc. SIMPLE IRA Plan from January 1, 2006, through December 31, 2008. A fiduciary to the company's SIMPLE IRA employee benefit plan, Hill had failed to remit the voluntary employee payroll deductions to the plan. As part of her plea, Hill was required to make restitution to the plan in the amount of $31,766.20. The investigation was conducted by the Washington District Office of EBSA and was prosecuted by the United States Attorney's Office for the Northern District of West Virginia.

United States v. Kimberly Hill - Kimberly Hill, the former accounts payable manager for Wildwood Industries, was sentenced on December 9, 2010 to 40 months' incarceration, with a subsequent three years of supervised release. The sentence, issued by the Federal District Court for the Central District of Illinois, requires Hill to restore $76,894.06 to 174 individual employees. These employees had contributed to their benefit plans through payroll deductions but did not receive their plan benefits. In addition, the court directed Hill to pay, jointly and severally with other defendants, $172,092,689.59 in restitution to the Wildwood Industries employee benefit plans.

Hill had pleaded guilty in March 2010 to federal charges of conspiracy to committing mail fraud, wire fraud, bank fraud, and theft from an employee benefit plan. Wildwood Industries was owned by Gary and Toni Jo Wilder and was located in Bloomington, Illinois. The company which manufactured, lawn, leaf, and vacuum bags as well as other products, sponsored a 401(k) plan and a health, dental, and disability plan for its employees. Kimberly Hill's theft from the employee benefit plans was part of a larger criminal scheme. The Wilders, along with Hill and several other co-conspirators, engaged in a massive fraud which resulted in 85 banks, lending institutions, and private lenders being defrauded for over $213 million dollars. Only Hill was charged with actual theft of employee benefit plan funds. As the accounts payable manager, she had failed to forward funds worth over $200,000 withheld from employees' payroll checks for the benefit of these plans. In addition, Hill's actions left the plans facing approximately $140,000 in outstanding medical claims.

EBSA Kansas City Regional Office pursued the case as part of a task force, together with the Department of Labor's Office of Labor Racketeering and Fraud Investigations, the FBI, Postal Inspectors, IRS-Criminal Investigations Division, and the FDIC. The case was prosecuted by the United States Attorney's Office for the Central District, Illinois.

United States v. Bryon Goldizen - On November 1, 2010, Bryon Goldizen, the president of Bryco Bore & Pipe, Inc., pleaded guilty in federal district court in Martinsburg, West Virginia, to embezzling $38,321.82 in plan assets from the Bryco company's SIMPLE IRA Plan, in violation of 18 U.S.C. § 664. The criminal investigation of Byron Goldizen was conducted by the Washington District Office of EBSA. The case was prosecuted by the United States Attorney's Office for the Northern District of West Virginia.

United States v. Anthony A. James - On September 9, 2010, Anthony A. James, an investment advisor who operated James Asset Advisory, LLC (a Michigan corporation), was sentenced in federal district court to 163 months of imprisonment followed by 60 months of supervised release. The court also ordered James to pay $2,667,762 in restitution to his victims. James had been convicted on April 15, 2010 on seven counts of mail fraud, six counts of wire fraud, and one count of embezzlement from an employee benefit plan.

From 2001 through June 2009, Anthony James received over $5,300,000 from more than 40 investors, among them contributory ERISA-covered employee benefit plans. James's fraud involved meeting with his clients to assess their investment goals and risk tolerances. James told his clients that he would invest their funds in securities, bonds, and mutual funds for their benefit. He would then create individualized asset allocation reports suggesting investment options, backed by bogus quarterly account statements which tracked the investors' money as if it had actually been invested. James used investors' money to operate a Ponzi scheme; instead of investing their money, he spent approximately $2,500,000 for his personal use and paid out around $2,800,000 to prior investors.

This investigation was conducted by EBSA in conjunction with the Department of Labor Office of Inspector General, and the FBI and prosecuted by the United States Attorney's Office, Eastern District of Michigan.

United States v. Gary L. Merritt - On November 23, 2010, Gary L. Merritt, Vice President of Bemcore, Inc., located in Dayton, OH, was sentenced in U.S. District Court, Southern District of Ohio, Western Division. For his sentence, the court ordered Merritt to serve five years of probation and to pay $182,070.56 in restitution within the year. Merritt had pled in August 2010 to one count of theft or embezzlement from an employee retirement plan, in violation of 18 U.S.C. § 664. Merritt co-owned Bemcore, Inc., a family-run tool and die company. The company sponsored the Bemcore, Inc. Employee Incentive Plan, a 401(k) retirement savings plan for which Merritt was the Trustee. From the beginning of 2009 until the Spring of 2010, Gary Merritt embezzled employee money from the Bemcore 401(k) plan. He transferred the money to Bemcore, Inc.'s corporate bank account and use the funds for business purposes.

The investigation was conducted by EBSA's Cincinnati Regional Office and prosecuted by the United States Attorney's Office for the Southern District of Ohio.

United States v. Pacesetter Corporation of America - On March 29, 2010, the Pacesetter Corporation of America, located in Omaha, Nebraska, pleaded guilty in the federal District Court of Nebraska to charges that it had stolen employee contributions and COBRA payments intended for the company's medical, group life and accidental death and dismemberment plans. Pacesetter was a manufacturer and direct seller of home improvement products such as windows, siding, and doors and had approximately 2,500 employees. The firm filed for bankruptcy in November of 2005 and ceased operations.

Pacesetter was charged with one count of embezzlement from a health care benefit program and one count of embezzlement from an employee benefit plan. For several months in 2005, Pacesetter kept funds deducted from employees' payroll that were to be used to pay claims covered under the plans. It also continued to accept and deposit COBRA payments from former employees. At the same time, Pacesetter failed to pay its claim obligations. In addition, Pacesetter did not inform employees that they had lost their coverage. Participant employees consequently suffered over $1.4 million in unpaid medical claims. At sentencing, Pacesetter received 12 months of probation and was ordered to pay the participants $67,533, the amount of monies withheld from employees' pay and COBRA payments. As part of the plea agreement, Mark Aloe, a former officer of the company, is prohibited from serving in any capacity that involves decision making authority or custody or control of the assets or property of any employee benefit plan for a period of 14 years.

This fact sheet has been developed by the U.S. Department of Labor, Employee Benefits Security Administration, Washington, DC 20210. It will be made available in alternate formats upon request: Voice phone: 202.693.8664; Text telephone: 202.501.3911. In addition, the information in this fact sheet constitutes a small entity compliance guide for purposes of the Small Business Regulatory Enforcement Fairness Act of 1996.