Opinion ID: 217197
Heading Depth: 2
Heading Rank: 2

Heading: False or Misleading Statements in a Required ERISA Document

Text: Defendants also challenge their convictions under 18 U.S.C. § 1027 for Making False or Misleading Statements in an ERISA Benefit Plan Document that Federal Law Requires to be Kept (Count 21). Count 21 concerned false statements in the 2001 Valuation Reports. Specifically, the government showed that the Valuation Reports, under the heading Additions During Year, indicated that both employee deferrals and employer contributions had been made to the Participants' accounts. According to the government's expert witness, these reports were not accurate [b]ecause these valuation reports show that . . . money had been placed into the trust. It shows that the contributions. . . had been placed into the trust and into investments so those monies can grow, which is in fact not the case. Defendants argue that this misstatement in the Valuation Reports is not material and, nevertheless, the Valuation Reports were not required under the ERISA. Because Defendants raised these arguments to the district court, our review is de novo. See United States v. Sarault, 840 F.2d 1479, 1482 (9th Cir.1988). We have held that § 1027 prohibits: (1) any knowingly made false statements or representations of fact, [and] certain knowingly concealed, covered-up, or undisclosed facts; (2) in a document required by ERISA to be either published by an employee welfare benefit plan or employee pension benefit plan, kept as part of the records of such a plan, or certified to the administrator of a plan. Sarault, 840 F.2d at 1482. Contrary to Defendants' contention, materiality is not a prerequisite for, or an element of, a false statement conviction. See 18 U.S.C. § 1027 (Whoever . . . makes any false statement or representation of fact (emphasis added)); Sarault, 840 F.2d at 1485 (explaining that Section 1027 prohibits  any knowingly made false statements or representations of fact); see also United States v. Nolan, 136 F.3d 265, 271 (2d Cir.1998) (Materiality is not an element of a § 1027 violation.). Even if it were an element of the offense, the Valuation Reports statement that money had been added during the Plan Year, when it in fact it had been used by the Company under Defendants' direction, was undoubtedly material information that Participants would have desired to know. For instance, had an employee attempted to cash out his 401(k) account at the end of 2001, he would have received far less than what was indicated in the Valuation Reports received from Defendants. Turning to the central question of whether the Valuation Reports were required by the ERISA, we begin by examining the Act's record-retention requirements: Every person . . . shall maintain records on the matters of which disclosure is required which will provide in sufficient detail the necessary basic information and data from which the documents thus required may be verified, explained, or clarified, and checked for accuracy and completeness, and shall include vouchers, worksheets, receipts, and applicable resolutions. . . . 29 U.S.C. § 1027. In Sarault, we cast a broad net concerning what is required by this statute. There, we reviewed the conviction of an attorney who made false representations about the solvency of an insurance company in a letter he sent to fund trustees who were seeking insurance coverage. 840 F.2d at 1481-82. The letter represented that the insurance company was secured by $20 million in reserves, which were actually fraudulent certificates of deposit. Id. at 1481. Following his conviction for making a false statement under § 1027, the defendant argued that only  financial records such as receipts and premium statements were required by the ERISA. Id. at 1483. Drawing from a predecessor statute to the ERISA, we observed that Congress intended for a broad range of documentation [to] be maintained under 29 U.S.C. § 1027. Id. at 1484. This range included the attorney's letter because the trustees used it to complete other forms required by the ERISA, including IRS Form 5500. See 29 U.S.C. § 1024(a)(2)(A); United States v. Harris, 185 F.3d 999, 1003-04 (9th Cir.1999). Thus, it was undoubtedly a document that provided `in sufficient detail the necessary basic information' to allow another ERISA form to be verif[ied], explain[ed], clarif[ied], and check[ed] for accuracy and completeness. Id. at 1483-84 (quoting 29 U.S.C. § 1027). Like the letter in Sarault, the Valuation Reports could be used, and indeed were used, by Defendants to complete the annual Form 5500. As noted supra, Form 5500 asks whether the company transmitted all Participant deferrals to the trust account. Answering this question required aggregating each Participant's contributions, as memorialized in the Valuation Reports, and then comparing that amount to the deposits to the Plan's brokerage account. Indeed, it was precisely this comparison that alerted Brad Sommerfeld that certain monies were not being remitted. Although Lunde Electric was not obligated to provide the Valuation Reports to investors unless demanded, Sommerfeld still completed them, used them to prepare the Form 5500, and then mailed them to Participants. The evidence showed that neither Defendant was ignorant of the misstatements in these reports. Raymond, as Trustee, signed these reports before they were sent to Participants. See Wiseman, 274 F.3d at 1243 (Key evidence of[the defendant's] involvement in the embezzlement is his endorsement . . . of the checks drawn from the benefit plan accounts. . . .). Likewise, Sigmund was present at the various times when attorney Braley and others told Defendants to deposit the deferrals and, according to Lunde Electric's several accountants, Sigmund was intimately involved in the Company's decisions about which bills should be paid with its dwindling cash revenues. Defendants' post-hoc rationalizationsin particular that, because Participants were ultimately repaid, these misstatements should be excusedignores the language of § 1027. As we observed in Harris, [a]ll a person has to do in order to comply [with § 1027] is fill out truthfully the [Form 5500]. 185 F.3d at 1004. Defendants would have us adopt a holding that undermines a clear purpose of the ERISA, which, as we detailed in Sarault, was the need to have more information available to plan beneficiaries so they can enforce their own rights. 840 F.2d at 1484. While Defendants, upon the DOL's launching of its investigation, may have experienced a change of heart and repaid the Plan Account, their initial decision to mislead their own employees about the solvency of their retirement plans by filing false account statements and false Form 5500s are the behaviors targeted by § 1027. Ultimately, the ERISA's goals of honest disclosure and investor protection would be greatly undermined if Defendants escaped liability for providing patently false account statements to Plan Participants. Accordingly, we hold there was sufficient evidence to support Defendants' convictions on Count 21.