FOR IMMEDIATE RELEASE AG
THURSDAY, MAY 15, 1997 (202) 616-2777
TDD (202) 514-1888
ATTORNEY GENERAL RENO AND LABOR SECRETARY HERMAN
ANNOUNCE CRACKDOWN ON PENSION ABUSE
WASHINGTON, D.C. -- Attorney General Janet Reno and Labor
Secretary Alexis Herman today unveiled a successful initiative to
combat abuse in the nation's pension and retirement fund system.
During the initiative, there have been 70 cases against pension
defendants, including five this morning in Boston.
In the past two weeks alone, federal prosecutors have
charged or convicted 24 defendants in 21 cases involving
estimated losses to pension plans of more than $17 million.
The effort, initiated last October, seeks to protect the
safety and integrity of the $3.5 trillion private pension plan
system, which the Labor Department projects will continue to
grow.
"As Americans grow more dependent upon retirement income
from pensions, it is important that they feel confident that
their investments remain safe and secure," said Reno. "This
initiative will bolster that confidence."
The ongoing 8-month-old initiative, which places greater
emphasis on criminal enforcement and better coordinates efforts
by federal agencies to improve enforcement against pension plan
abuse, has produced significant results. During that time,
federal investigations have resulted in charges or convictions
against 109 individuals in 70 cases nationwide involving more
than $90 million in pension plan losses. Federal investigators
have worked with state investigators on four of these cases and
five cases were brought by state prosecutors. The losses effect
the retirement assets of pension plans with a total of more than
150,000 participants.
"Most pension plans are well-managed and financially safe,"
said Herman. "A few unscrupulous persons, however, still see
these plans as ripe targets to siphon off the hard-earned
retirement money of American workers."
Both officials stressed that the initiative was not taken in
response to any crisis confronting pension plans and retirement
funds.
Coordinated by the Justice Department's Criminal Division,
the Executive Office for U.S. Attorneys, and the Attorney
General's Advisory Committee of U.S. Attorneys, the initiative
relies on the work of several agencies that investigate pension
plan abuses, including:
* The Department of Labor's Pension and Welfare Benefits
Administration -- which has primary responsibility for
protecting the financial integrity of the 700,000 private
sector pension plans subject to the Employee Retirement
Income Security Act (ERISA). It investigated 50 of the 70
pension abuse cases.
* The Inspector General's Office of Investigations at the
Department of Labor -- which focuses primarily on abuse of
collectively bargained pension plans. It investigated 18 of
the 70 matters.
* The Federal Bureau of Investigation -- which investigates a
wide range of pension and retirement abuses. It helped
investigate 33 of the 70 cases.
* The Internal Revenue Service -- which plays a dual role in
private pension plans. The Employee Plan/Exempt Organiza-
tions (EP/EO) Division grants tax exempt status and examines
annual reports filed with the IRS. The Criminal Investi-
gation Division (CID) investigates fraudulent activities
involving taxes evaded on the theft, misuse, or embezzlement
of pension plan funds. IRS-CID participated in the
investigation of 12 of the 70 cases.
* The Securities Exchange Commission -- which is alert to
schemes that prey on investors' retirement savings,
including funds in Individual Retirement Accounts (IRAs) and
other self-directed programs that are not regulated as
employee pension plans. Evidence obtained in Commission
investigations and provided to the Justice Department has
contributed to initiative cases involving more than $58
million in losses to pension plans and individual retirement
accounts.
"The Commission has been and will continue to be aggressive
in pursuing those who defraud investors of their retirement
savings," said Arthur Levitt, Chairman of the Securities and
Exchange Commission. Levitt added that since 1994, the
Commission has brought more than 22 cases seeking the return of
more than $160 million to defrauded IRA investors.
"As more Americans are reaching retirement age and have
planned carefully to be financially secure, there is a critical
need to protect and safeguard pension funds from corrupt
individuals," said Margaret Milner Richardson, Commissioner of
the Internal Revenue Service. "The amount of money available in
pension plans makes the funds a prime area for potential abuse.
Therefore, IRS Criminal Investigation and Employee Plans/Exempt
Organizations are actively investigating tax fraud in this area
of financial investment."
"We intend to prosecute those who treat the hard earned
retirement dollars of American workers as their private piggy
bank," said Donald K. Stern, U.S. Attorney for the District of
Massachusetts, representing the federal prosecutors who have
brought the federal cases.
Most of the cases stemming from the initiative involve
owners and officials of small and mid-sized companies embezzling
employee pension plan assets for their personal use or for use by
the companies.
Other cases involved service providers for large employee
pension plans whose abuses usually involved greater monetary
losses and often affected more than one plan. Still others
involve union officials and plan officials who took kickbacks in
order to allow others to steal from pension plans.
In November 1995, the Department of Labor launched a
national enforcement project to reduce the misuse of
contributions to so-called 401(k) pension plans. In March,
President Clinton announced that the 401(k) initiative had
resulted in the recovery of $22 million in 401(k) plan assets for
40,800 workers nationwide.
"This law enforcement initiative builds on the Admini-
stration's effort to ensure the safety of all pension plans,"
added Reno.
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