OWNERS OF NOW DEFUNCT BALLARD ELECTRICAL FIRM SENTENCED FOR EMBEZZLEMENT FROM EMPLOYEE 401(K) PLAN
Father and Son Sentenced to Probation and Fines for Taking Employee Retirement Contributions
SIGMUND G. ERIKSEN and RAYMOND A. ERIKSEN were sentenced today in U.S. District Court in Seattle to two years of probation and each must pay a $20,000 fine and perform 240 hours of community service 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. The two men formerly owned Lunde Electric, an electrical contracting firm in the Ballard neighborhood of Seattle. The two were convicted in October 2009, following a seven day trial and two days of jury deliberation. The men were acquitted of 9 counts and the jury failed to reach a verdict on other charges. At sentencing 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.
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.
In asking for prison sentences for both men, prosecutors wrote to the court that the ERIKSENs “...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 said he did not think a prison sentence was needed.
The case was investigated by the U.S. Department of Labor.
The case was prosecuted by Assistant United States Attorneys J. Tate London and Robert Westinghouse.
For additional information please contact Emily Langlie, Public Affairs Officer for the United States Attorney’s Office, at (206) 553-4110 or Emily.Langlie@USDOJ.Gov.