The two 401k accounts of Evan Greebel, the lawyer for infamous “Pharmo bro” Martin Shkreli, are indeed subject to garnishment to help pay Greebel’s court-ordered $10.4 million restitution, according to a decision this week from U.S. Court of Appeals for the Second Circuit.
Greebel, a former partner at the New York office of Katten Muchin Rosenman LLP who served as outside counsel to biopharmaceutical company Retrophin, Inc., was convicted in 2017 of conspiring with Shkreli to commit wire fraud and securities fraud and sentenced to 18 months’ imprisonment to be followed by three years’ supervised release. He was also ordered to pay the sizable restitution to victims of their fraud scheme, which netted millions of dollars in cash and stock from Retrophin and manipulated the price and trading volume of Retrophin stock.
Reuters reported this week that due to Wednesday’s ruling, prosecutors have authority under the federal Mandatory Victims Restitution Act to pursue garnishment of the 401k accounts belonging to Greebel—reportedly worth $921,000—that would otherwise be protected under the Employee Retirement Income Security Act (ERISA), which protects retirement savings held in employer-sponsored plans from being “assigned or alienated” for other purposes.
Greebel contended that 401k accounts from his time working at Katten Muchin Rosenman, where he had been a partner until 2015, and before that as an associate at Fried, Frank, Harris, Shriver & Jacobson should be off-limits from the government.
In the appeals case, United States v. Greebel, 2nd U.S. Circuit Court of Appeals, No. 21-993, Greebel argued he had no unilateral right to withdraw funds from his 401k accounts to make available to victims and that the money was shielded from creditors by ERISA. Greebel also argued the federal Consumer Credit Protection Act and a 25% garnishment cap applied in his case.
Bloomberg Law reports that in allowing portions of Greebel’s retirement accounts to be garnished, the Second Circuit acted in line with earlier decisions by the Fourth and Ninth circuits. The appeals court largely disagreed with Greebel’s argument that the government couldn’t access his 401ks, saying it was based on a “series of tortured contract interpretations.”
But in a partial win for Greebel, the court sent the dispute back to a district judge to assess whether federal prosecutors’ garnishment will trigger the 10% early-withdrawal penalty and affect the amount the government can seize.
Prosecutors have said it is unlikely Greebel will be required to pay the early withdrawal penalty, according to Reuters, which said the U.S. Attorney’s Office for the Eastern District of New York, which represents the government in the case, government pointed to a U.S. Tax Court ruling that said the tax does not apply in circumstances where a defendant’s retirement plan is subject to forfeiture as part of a criminal plea.
Incidentally, the New York Post reports Shkreli, who rose to notoriety after skyrocketing the price of a life-saving AIDS treatment drug to $750 a pill from $13.50 after obtaining the exclusive rights to it in 2015, was just ousted this week as the boss of the pharmaceutical company he founded by a group of activist shareholders. Shkreli, who was sentenced to seven years in prison in 2017 along with $7.4 million in fines (and another $64.6 million to be given to the fraud victims in a civil case), was released in May and moved to a halfway house, where he is expected to be released Sept. 14.