In the March 2021 decision of United States v. O’Brien, the Second Circuit Court of Appeals ruled that Manhattan prosecutors could garnish the wages of a former partner at Sullivan & Cromwell who made no restitution payment after a 2011 conviction on federal tax charges.
The defendant owed almost all of the more than $2.8 million in restitution, and his former employer was directed to pay part of the restitution in one lump sum from the defendant’s retirement funds.
The defendant worked for Sullivan & Cromwell from 1992 to 2009. In 2011, he pleaded guilty to four misdemeanor tax charges and served a 28-month sentence in a federal prison. He was ordered to make restitution payments in monthly installments of at least $500 following his release in 2014. However, he made “irregular payments” ranging from $200 to $1,000 but had stopped making a regular restitution payment in 2017. As of July 2018, he had paid less than $5,000.
Based on discussions with his probation officer and overpayments that had been made in some months, the defendant did not believe he was in default.
In July 2018, the United States Attorney’s Office for the Southern District of New York filed an application for garnishment, claiming that the defendant had a nonexempt interest that could be garnished to satisfy the remaining restitution owed.
In September 2019, the court ordered the defendant’s former employer to pay the cash surrender value of the defendant’s interest in two retirement plans it held on behalf of the defendant, plus interest. The balance of the accounts was approximately $711,000.
On appeal, the defendant challenged whether the lump-sum payment was appropriate in light of the payment plan that was in place. Specifically, the defendant claimed that the restitution order required him to make payments of “at least” $500 per month.
Ruling against the defendant, the court noted that “[t]he government may enforce restitution orders arising from criminal convictions using the practices and procedures for the enforcement of a civil judgment under federal or state law as set forth in the [Federal Debt Collection Procedures Act]” and that garnishment is one of the post-judgment remedies available to the government.
The court went on to state that “neither the payment plan nor any other part of the criminal judgment indefinitely limited the government’s collection efforts on this substantial restitution order of over $2.8 million to merely $500 per month” and that “the payment plan in the criminal judgment presented no legal barrier to the issuance of a garnishment order under the circumstances of this case and provides no basis to disturb the district’s court’s issuance of such an order.”
The government may enforce restitution orders arising from criminal convictions using the practices and procedures for the enforcement of a civil judgment under federal or state law as set forth in the Federal Debt Collection Procedures Act (“FDCPA”), 28 U.S.C. § 3205(a). Among the post-judgment remedies available to the government for enforcement under the FDCPA is garnishment. See 28 U.S.C. §§ 3205(a), 3202. Many types of retirement accounts are exempt, however, as O’Brien makes clear, there are circumstances where the federal government can garnish your retirement account if you were convicted of a crime and are under an order to pay restitution.
If you are under investigation or have been charged with a federal crime, you need to protect yourself, your family, and your retirement. Philadelphia criminal defense attorney Hope Lefeber can help.
Ms. Lefeber began her career as an enforcement attorney with the U.S. Securities & Exchange Commission where she learned first-hand how the federal government prepares and prosecutes federal criminal cases. Today, she uses that experience to defend people accused of crimes in federal court. She has earned a reputation among her colleagues in the federal bar, federal judges, and her clients as a fierce defender of her clients’ rights.
Ms. Lefeber is meticulously prepared and has a deep knowledge of federal criminal law. She has successfully defended executives at Fortune 500 companies, businessmen and women, lawyers, doctors, and other high-profile clients who have been faced with federal criminal charges.
If you have been charged with a crime in federal court, contact Hope Lefeber today to schedule a confidential consultation to discuss your case.
This article can also be found on our New York City Federal Defense website