The following discussion was prepared by the Labor-Management Unit of the Organized Crime and Racketeering Section and previously published in Criminal Case Prosecutions Involving Employee Benefit Plans: Prosecutor's Guide (United States Department of Labor, Pension and Welfare Benefits Administration, 1994). In order to establish a violation of 29 U.S.C. § 1111 for a disqualifying crime committed on or after October 12, 1984, the government must allege and prove the following essential elements:
- The jurisdictional entity involved is an employee benefit plan within the meaning of ERISA (29 U.S.C. § 1001 et seq.).
- The defendant is a disqualified person who serves or permits another disqualified person to serve in any of the prohibited capacities specified in the statute. See, for example, United States v. Smith, 698 F. Supp. 589 (E.D.Pa. 1988), aff'd without opinion, 872 F.2d 415 (3d Cir. 1989), which held that the prohibited capacity of "consultant" is broadly defined and includes compensated, indirect assistance to an employee benefit plan by means of employment with service providers to the plan. In rejecting defendant's argument that section 1111 only prohibited direct employment of convicted persons by an ERISA plan itself, the court concluded that "certain convicted felons were prohibited, irrespective of their precise employment status, from receiving compensation for advising or consulting employee benefit plans." Id. at 698 F. Supp. 594.
- The disqualified person was convicted of one of the crimes described in the statute within the last thirteen years, or has been released from imprisonment resulting from a disqualifying conviction within the last thirteen years, whichever is later.
- The defendant intentionally serves in a prohibited capacity or knowingly and intentionally permits a disqualified person to serve in a prohibited capacity.
Only TWO categories of crimes must be felony convictions:
- A felony violation of Federal or state law involving controlled substances defined in the Federal Comprehensive Drug Abuse Prevention and Control Act of 1970 (21 U.S.C. § 802(6)); or
- "Any felony involving abuse or misuse of such person's position or employment in a labor organization or employee benefit plan to seek or obtain an illegal gain at the expense of the members of the labor organization or the beneficiaries of the employee benefit plan."
The following categories of crimes may be felonies or misdemeanors:
- Robbery, Fraud, Murder, Bribery, Grand Larceny, Rape, Extortion, Burglary, Kidnapping, Embezzlement, Arson, Perjury, Assault with Intent to Kill;
- Any crime described in the Investment Company Act of 1940 at 15 U.S.C. § 80a-9(a)(1) -- this category describes persons convicted within 10 years of any felony or misdemeanor involving the purchase or sale of a security or arising out of such person's conduct as an underwriter, broker, investment adviser, etc. or as a person required to be registered under the Commodity Exchange Act;
- Any crime in ERISA (includes 29 U.S.C. §§ 1111, 1131, 1141);
- A violation of 29 U.S.C. § 186 (prohibited payments to labor unions, labor union officials, and employee representatives);
- A violation of Chapter 63 of Title 18, United States Code (18 U.S.C. § 1341, et seq.; mail fraud, wire fraud, et al.);
- A violation of 18 U.S.C. §§ 1503, 1505, 1510, 1951 or 1954;
- A violation of any criminal provision of LMRDA (29 U.S.C. §§ 439, 501(c), 502, 503, 504, 522, 530 involving crimes against labor organizations in the private sector);
- Conspiracy or Attempt to commit any crime described in section 1111;
- A crime in which any of the crimes described in section 1111 is an element. See Postma v. Teamsters Local 294, 229 F. Supp 655 (N.D.N.Y.), aff'd, 337 F.2d 609 (2d Cir. 1964).
A crime whose conduct is substantially equivalent to a crime described in section 1111 will also disqualify the convicted person. See discussion above of section 1111's parallel statute, 29 U.S.C. § 504.
Except for the category of felonies involving abuse or misuse of labor organization or benefit plan employment, the generic disqualifying crimes need not be related to labor union or benefit plan operations. See Lippi v. Thomas, 298 F. Supp 242, 247 (M.D. Pa) 1969).
[cited in USAM 9-138.030]