Opinion ID: 217197
Heading Depth: 3
Heading Rank: 1

Heading: Scope of the Offense

Text: Defendants were convicted under 18 U.S.C. § 664 for embezzling or converting the Plan's assets in December 2002 and March 2003. Section 664 provides: Any person who embezzles, steals, or unlawfully and willfully abstracts or converts to his own use or to the use of another, any of the moneys, funds, securities, premiums, credits, property, or other assets of any employee welfare benefit plan or employee pension benefit plan, or of any fund connected therewith, shall be fined under this title, or imprisoned not more than five years, or both. As used in this section, the term any employee welfare benefit plan or employee pension benefit plan means any employee benefit plan subject to any provision of title I of the Employee Retirement Income Security Act of 1974. 18 U.S.C. § 664. We have held that the operative terms embezzles and converts are to be given their common-law meanings. United States v. Andreen, 628 F.2d 1236, 1241 (9th Cir.1980); Woxberg v. United States, 329 F.2d 284, 290 (9th Cir. 1964). Thus, [e]mbezzlement is the fraudulent appropriation of property by a person to whom such property has been entrusted, or into whose hands it has lawfully come. Woxberg, 329 F.2d at 290; see also Andreen, 628 F.2d at 1241 (citing United States v. Dupee, 569 F.2d 1061, 1064 (9th Cir.1978)). Conversion encompasses the use of property, placed in one's custody for a limited purpose, in an unauthorized manner or to an unauthorized extent. Andreen, 628 F.2d at 1241 (citing Morissette v. United States, 342 U.S. 246, 272, 72 S.Ct. 240, 96 L.Ed. 288 (1952)). We have also recognized that § 664 does more than recapitulate common-law offenses. Because § 664 and other pension-protection laws, see, e.g., 29 U.S.C. § 501(c) (prohibiting embezzlement from a labor organization fund), are aimed at preserv[ing] welfare and pension funds for the protection of those entitled to their benefits, we have held that § 664 imposes liability for a broad class of unauthorized acts willfully committed by those in a fiduciary or advisory capacity. See Andreen, 628 F.2d at 1241, 1242 (examining the legislative history of 29 U.S.C. § 501, 18 U.S.C. § 664). As then-Judge Kennedy explained: The essence of the crime is theft and in the context of union funds or pension plans the offense includes a taking or appropriation that is unauthorized, if accomplished with specific criminal intent. In this respect lack of authorization may be shown if the diversion is substantially inconsistent with the fiduciary purposes and objectives of the union funds or pension plan, as set forth by statutes, bylaws, charters, or trust documents which govern uses of the funds in question. Whatever imprecision attends this definition is remedied substantially by the requirement of scienter, which is an essential element of the crime. The act to be criminal must be willful, which means an act done with a fraudulent intent or a bad purpose or an evil motive. Id. at 1241 (emphasis added) (citation omitted). We have consistently declined invitations to engraft additional elements onto, or create affirmative defenses for, § 664 violations. In Andreen, we rejected the participant benefit theory by holding that so long as a fiduciary used plan assets in an unauthorized manner, the lack of benefit to the [plan beneficiaries] is not an element of the offense required to be shown as part of the prosecution's case. Id. at 1242. Likewise, the conferring of any benefit in such a case is not a defense, except insofar as it may bear upon the defendant's state of mind in committing the acts in question. Id. at 1242-43. We thus rejected the appeal of an attorney who had assisted the trustees of a pension plan in drafting an unauthorized compensation plan that rewarded the trustees for merely executing their fiduciary duties. Id. at 1245-46. We reasoned that the attorney's attendance at trustee meetings where the compensation plan was discussed, coupled with his knowledge that the plan was unauthorized, was sufficient to show that he aided and abetted a violation of § 664. Id. at 1246. In United States v. Ford, a companion case to Andreen, we affirmed the convictions of the trustees whom Andreen had assisted. 632 F.2d 1354 (9th Cir.1980), overruled on other grounds, as recognized in United States v. Miller, 874 F.2d 1255, 1268 (9th Cir.1989). In reviewing a sufficiency-of-the-evidence challenge, we highlighted repeatedly certain circumstantial facts that showed the trustees' awareness that their behavior was not authorized by the trusts' beneficiariesprimarily that the trustees were offering themselves benefits from the trust at a lower cost than was available to beneficiaries. Id. at 1366, 1367 n. 12, 1368. In two related appeals, United States v. Mett, 178 F.3d 1058 (9th Cir.1999), and United States v. Wiseman, 274 F.3d 1235 (9th Cir.2001), we again disavowed a participant-benefit defense and further held that ERISA-plan fiduciaries could not be implicitly authorized to use assets in a manner that jeopardizes their availability for the beneficiaries. Mett, 178 F.3d at 1067-68. Mett and Wiseman were separate appeals of the same underlying prosecution against two executives of an art gallery who withdrew $1.6 million from a pension plan to finance their floundering enterprise. Id. at 1060-61. Mett, the gallery's president, and Wiseman, the vice-president, served as the trustees of two pension benefit plans. Id. at 1060. After being indicted for felony art fraud, their gallery fell on hard times, and the trustees withdrew money from pension plans and deposited it into the company's general operating account without informing the employees-beneficiaries. Id. at 1060-61. While Mett and Wiseman admitted making the withdrawals, they sought to avoid liability by characterizing their appropriations as implicitly authorized loans necessary for the business to survive. Id. at 1060. This implied authorization was founded on the premise that, because the gallery would have had to be closed and the employee-beneficiaries would otherwise have been laid off and faced with unemployment, id., the acts were not criminal. We rejected the implied authorization defense based on a fiduciary's purported intention to serve the broader interests of employee welfare. Id. at 1067. Because ERISA funds are protected so that they will be available at retirementand are therefore subject to numerous non-alienation restrictionswe observed that an authorization argument was illogical. After all, if the beneficiaries themselves are not at liberty to dispose of the funds for a purpose other than retirement, they could not lawfully authorize someone else to do it for them. Id. at 1068 ([I]t is little different from arguing that complete strangers `authorized' the illicit transactions.). Following retrial in light of other errors, the Mett defendants returned to us in United States v. Wiseman , claiming that the district court had committed new errors by not giving a mistake-of-law instruction or an instruction that the government had to show the defendants were not borrowing from the pension. 274 F.3d at 1241. We rejected both contentions. With respect to the mistake-of-law argument, we held that, although `the defendant must knowingly act wrongfully to deprive another of property,' there is no requirement that the defendant also know his conduct was illegal. Id. at 1240 (alterations and internal quotation marks omitted). We likewise rejected the gallery executives' borrowing-from-the-pension-fund defense. Id. at 1241. We stated that evidence of borrowing, or for that matter evidence of intent to repay, is relevant to criminal intent, but that [i]ntent to repay generally is not a defense to embezzlement. . . [or] conversion. Id. (citing United States v. Ross, 206 F.3d 896, 899 (9th Cir. 2000)); see also United States v. Thordarson, 646 F.2d 1323, 1335 n. 22 (9th Cir. 1981).