In its opinion, the 4th Circuit said contributions become plan assets when they are due and payable. John Alvis Jackson, Jr., and Larry Andrew Carey, administrators for three ERISA plans for employees of Burruss Holding Company, argued that employer contributions for the plans were not assets until they were paid, and thus they could not be guilty of theft of plan assets.
The appellate court cited another court opinion which stated that “when an ERISA employer has paid wages or salaries to its employees, it is contractually bound to contribute to any ERISA plan that it maintains.” The prior 10th Circuit opinion also said “an employer must comply with its contractual obligations to make contributions to its ERISA plan, and such a contractual obligation constitutes an “asset’ of the ERISA plan.’
Jackson and Carey also said that they could not be guilty of theft because they were not plan fiduciaries, but the 4th Circuit pointed out that Section 664 does not require that an accused be a fiduciary but plainly describes theft by “any person.’
Jackson was president and CEO of The Burruss Company, and Carey was its CFO. When the company began having financial difficulties, the two made false financial statements, became delinquent on vendor payments, and increasingly borrowed money to pay expenses.
During this time, Jackson and Carey failed to submit required contributions to two pension plans and a health care plan for employees, but submitted Form 5500’s indicating the contributions had been made. When initially questioned about the contributions, they claimed checks had been submitted but must have been misplaced.
Later, when confronted, Jackson and Carey said they had stopped making contributions to the plan, but were told they could not do so unless they officially terminated the plans. The plans were still owed contributions for 1998 and 1999, totaling over $329,000.
Eventually, the company filed bankruptcy.
The decision in United States v. Jackson, 4th Cir., No. 07-4103, can be accessed here.