The former owners of Lunde Electric in Ballard now face the penalty for two felony charges of Embezzlement or Conversion from an Employee Pension Benefit Plan, and one felony charge of Falsification of Records of an Employee Pension Benefit Plan.
Sigmund G. Eriksen and Raymond A. Eriksen were sentenced on Friday to two years of probation, a $20,000 fine each and they must perform 240 hours of community service.
The Eriksens were convicted in October 2009. A jury acquitted the two of nine counts and couldn’t reach a verdict on the other charges. At the sentencing on Friday, “U.S. District Judge John C. Coughenour said that any businessman who talks with the Eriksens will realize that they would be a fool to engage in similar conduct and run the risk of a felony prosecution and conviction,” the press release from the Department of Justice states. Here are details from the release:
According to testimony at trial and records filed in the case, Lunde Electric adopted a 401(k) retirement plan for their non-union employees in 1995. Employees could pay a portion of their salary into the plan, and the company would match 50% of the employee contribution. By law, employee contributions are to be paid into the trust fund as soon as deducted from employees’ paychecks and in no case later than the 15th day of the following month. Beginning in January 1999, and continuing into 2003, the Eriksens failed to forward the employee contributions to the 401(k) trust fund. Employees received 401(k) account statements that failed to disclose that their contributions had not been paid into the trust fund.
The Eriksens were advised by their attorney and accountant to begin forwarding the employee contributions to the trust fund, but failed to do so. In October 2004, some 18 months after the U.S. Department of Labor subpoenaed the Lunde Electric 401(k) records, the Eriksens paid just over $90,000 to the trust fund, more than $65,000 of that was employee money. The Eriksens were indicted in December 2008.
Prosecutors wrote to the court asking for prison time because the men, “…stole their employees’ retirement contributions month after month over a four-year period and used these funds to meet the financial obligations of a company that they, and only they, owned and controlled. They did so despite their fiduciary obligations to their employees as the plan trustees; despite the repeated input from their bookkeeper; despite the advice and warnings they received from their ERISA attorney and plan accountant; and despite having no need for their employees’ contributions. They stopped taking their employees’ money only after they were served with grand jury subpoenas in early April 2003, i.e., only after the Department of Justice intervened.” Judge Coughenour decided that prison time for the two was not necessary. (Thanks Todd for the tip!)