Shkreli Co-Conspirator Lawyer Must Use 401(k) for Restitution

A former Katten Muchin Rosenman LLP lawyer convicted of conspiring with Martin Shkreli to commit securities fraud can be forced to put part of his $921,000 retirement accounts toward his $10.4 million restitution order, the Second Circuit ruled Wednesday.

Evan Greebel’s 401(k) accounts from his years working at Katten and at Fried, Frank, Harris, Shriver & Jacobson LLP are subject to garnishment under the Mandatory Victims Restitution Act, the US Court of Appeals for the Second Circuit held. The MVRA permits garnishment of retirement savings that would otherwise be protected by the Employee Retirement Income Security Act, the court said.

The court’s opinion considers the intersection of the MVRA, which authorizes courts to award reimbursement to crime victims, and ERISA, which protects retirement savings held in employer-sponsored plans from being “assigned or alienated” for other purposes. 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.

Greebel, who was convicted in 2017 of conspiring with Shkreli to defraud investors in Retrophin Inc., argued that the government couldn’t access his retirement accounts because he doesn’t currently have a unilateral right to withdraw that money. The appeals court largely disagreed, saying this argument was based on a “series of tortured contract interpretations.”

However, the court sent the dispute back to a district judge to consider the effect of a tax code provision imposing a 10% penalty on early withdrawals from retirement accounts. This provision doesn’t preclude the government from garnishing the accounts, but if it applies, it could reduce the amount of money the government could recover, the court said.

Finally, the court declined to hold that the Consumer Credit Protection Act placed limits on the amount of money subject to garnishment.

Judge Richard C. Wesley wrote the opinion. Judges Joseph F. Bianco and Myrna Pérez joined.

Gibson, Dunn & Crutcher LLP represents Greebel. The US Attorney’s Office for the Eastern District of New York represents the government.

The case is United States v. Greebel, 2d Cir., No. 21-993, 8/24/22.