Opinion ID: 766590
Heading Depth: 2
Heading Rank: 1

Heading: Preclusion of Prosecution

Text: 17 Appellant's primary argument rests on the claim of prosecutorial preclusion. According to this theory, the government should have been estopped from prosecuting Hook under 18 U.S.C. sec. 664 because of the judgment it sought in P.B.G.C. v. Wittek Industries, No. 3: 95CV117MCK at 2, which retroactively set the termination date for the 6141 Plan at February 13, 1991, before Defendant's conduct occurred. Defendant contends that the conviction under sec. 664 was predicate to the other six counts of his conviction, the three counts of wire fraud and the three counts of money laundering. Therefore, estoppel on sec. 664 bars prosecution on the entire superseding indictment. Defendant's contention rests on two propositions of law: 1) the order of the district court in P.B.G.C. v. Wittek should have judicially estopped the prosecution of the sec. 664 claim; or 2) the retroactive termination of the 6141 Plan precludes the proof of an essential element of the sec. 664 claim. We disagree with both propositions.
18 Defendant contends that the prosecution of the indictment against him should have been precluded because the government is estopped from arguing one position at trial when one of its instrumentalities had previously litigated the opposite position in an earlier action. As such, Defendant's contention is one of judicial estoppel, which is an equitable concept 'provid[ing] that a party who prevails on one ground in a lawsuit cannot turn around and in another lawsuit repudiate the ground.' Ogden Martin Systems of Indianapolis v. Whiting Corp., 179 F.3d 523, 526 (7th Cir. 1999) (quoting McNamara v. City of Chicago, 138 F.3d 1219, 1225 (7th Cir.), cert. denied, ___ U.S. ___, 119 S. Ct. 444 (1998)). The purpose of judicial estoppel is to protect the courts from being manipulated by chameleonic litigants who seek to prevail, twice, on opposite theories. Levinson v. United States, 969 F.2d 260, 264 (7th Cir. 1992). Although the doctrine has no precise bounds, certain clear prerequisites exist for its application: (1) the later position must be clearly inconsistent with the earlier position; (2) the facts at issue should be the same in both cases; and (3) the party to be estopped must have convinced the first court to adopt its position. Id. at 264-65. 19 Here, PBGC successfully convinced the United States District Court for the Western District of North Carolina to adopt a termination date of February 13, 1991, for the 6141 Plan, P.B.G.C. v. Wittek Industries, No. 3: 95CV117-MCK at 2. Despite the different procedural postures of the two actions, the same operative facts are at issue here as in P.B.G.C. v. Wittek. However, Defendant does not argue, and we are not convinced, that the government's present position is inconsistent with its former position. 20 In P.B.G.C. v. Wittek, the government filed an action to name the PBGC as trustee of the 6141 Plan and to terminate the 6141 Plan pursuant to Title IV of the ERISA. See 29 U.S.C. sec.sec. 1342(b)-(c). The purpose of such an action is to set a proper date for administrative use, in order that the PBGC, as an insurer of underfunded pension plan participants, may ascertain a proper starting date for benefits and premiums to accrue. See 29 U.S.C. sec. 1342; Pension Benefit Guaranty Corp. v. Heppenstall Co., 633 F.2d 293, 296-97 (3d Cir. 1980). The purpose of setting such a termination date is in order to protect the interests of the participants or to avoid any unreasonable deterioration of the financial condition of the plan or any unreasonable increase in the liability of the fund. 29 U.S.C. sec. 1342(c). 21 Defendant Hook advances the argument that, because the government succeeded in establishing a termination date in 1995 for the 6141 Plan at February 13, 1991, it must be estopped from arguing that Defendant stole from an ERISA plan, an essential element of the sec. 664 offense. To accept this reasoning, we first must accept Defendant's mindbending logic that a retroactive termination designed to establish the level of benefits for defrauded plan members should decriminalize the conduct of the parties who have substantially aggravated the deterioration of the plan. In addition, we must accept that the government's positions are clearly inconsistent. They are not. The action to set a termination date for an involuntary termination serves an administrative purpose--to establish a date when benefits and premiums begin to accrue. The government's current position, that the plan was an ERISA plan at the time that Defendant defrauded it, is not affected by the establishment of a date to set benefits. To argue otherwise would be antithetical to the statutory purpose of sec. 1342, which is to guarantee plan members their due benefits. Since the positions taken by the government are not clearly inconsistent, the district court did not err in permitting the government to prosecute Hook's indictment. 22
23 Even if his prosecution was not precluded by judicial estoppel as he asserts, Defendant still argues that the essential elements of the sec. 664 claim were not proven. Defendant's argument rests upon the premise that the determination of a plan termination date as of February 13, 1991, terminated the 6141 Plan, which removed an essential element from the sec. 664 claim. Because we find that establishment of a retroactive termination date does not decriminalize a defendant's conduct subsequent to that date, we reject Defendant's argument. 24 Section 664 criminalizes the conduct of [a]ny 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 . . . . 18 U.S.C. sec. 664. An employee welfare benefit plan is defined as any employee benefit plan subject to any provision of title I of [ERISA]. 18 U.S.C. sec. 664 (emphasis added). To violate sec. 664, a defendant must steal from an employee-benefit plan, for there is no indication that sec. 664 was intended to apply to any funds other than those governed by ERISA. United States v. Bell, 22 F.3d 274, 276 (11th Cir. 1994). A terminated plan is no longer subject to any provision of Title I of ERISA, see Trippet v. Smith, 592 F.2d 1112, 1113 (10th Cir. 1979), however, an employee-benefit plan may not be terminated except by the procedure outlined in 29 U.S.C. sec. 1341. Phillips v. Bebber, 914 F.2d 31, 34 (4th Cir. 1990). Until an employee-benefit plan has been terminated, the duties and protections of Title I continue to apply to the plan. See Waller v. Blue Cross of California, 32 F.3d 1337, 1343 (9th Cir. 1994); see also Martin v. Lundberg, No. CA3-88-2470D (W.D. Tex. 1991) (applying Title I fiduciary standards to plan undergoing termination). The applicability of Title I fiduciary and criminal protections to a terminating ERISA plan is a question of first impression in this circuit. 25 Defendant contends that an essential element of the theft claim cannot be proved because of the ambiguity of the procedures for terminating an ERISA plan. When a plan is involuntarily terminated, and the trustee and plan administrator cannot agree on a termination date for the plan, the court must determine a termination date. See 29 U.S.C. sec.sec. 1348(a)(4), (b)(2). Since the judicial process and the process of involuntary termination both take time to complete, a judge often must set a retroactive termination date to ensure that plan members and the corpus of the plan both receive equitable treatment. After the establishment of a retroactive termination date, the plan during the time between the termination date and the effective liquidation of the plan exists in legal limbo where termination has occurred but liquidation has not. 26 Defendant would exploit this ambiguity by suggesting that the establishment of a termination date retroactively terminates the plan and ends the applicability of Title I of ERISA, including the applicability of sec. 664, to the 6141 Plan. However, as we have stated before, the mere establishment of a termination date does not terminate an employee-benefit plan. A plan can only be terminated in the manner prescribed by 29 U.S.C. sec. 1341, a process which undisputedly continued until at least 1995 when PBGC was appointed trustee of the 6141 Plan. We hold that, during the period between the termination date and the final liquidation of the 6141 Plan, the plan was legally within the process of termination. As such, the fiduciary and criminal standards of Title I continue to apply to the Plan. To hold that sec. 664 would become inactive whenever a retroactive termination date has been set would frustrate the purpose of sec. 664, which is to protect the employee-benefit plan members from having their assets embezzled, by allowing thieves to convert all of the money from a plan merely by laying off plan members before stealing their accrued benefits. By setting a retroactive termination date, a district court does not remove Title I protections from an employee-benefit plan; the district court merely sets an administrative point of reference that will allow the plan administrator and trustee to compute accrued benefits and premiums. 27 The prosecution of Hook should not have been precluded by judicial estoppel, nor should the establishment of a retroactive termination date have forced, as a matter of law, the conclusion that an essential element of sec. 664 had not been proved on the district court. Defendant bases his challenge to his convictions on the remaining counts in his indictment on the basis that these claims depended in their essential elements upon the theft count. Since we have found that the prosecution of the sec. 664 count was without error, we need not reach the question whether the wire fraud and money laundering counts factually depended on the sec. 664 count.