United States v. Eriksen

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
UNITED STATES OF AMERICA, 
Plaintiff-Appellee, No. 10-30056
v.  D.C. No.
2:08-cr-00404-
RAYMOND ERIKSEN, JCC-1
Defendant-Appellant.

UNITED STATES OF AMERICA,  No. 10-30057
Plaintiff-Appellee, D.C. No.
v.  2:08-cr-00404-
SIGMUND ERIKSEN, JCC-2
Defendant-Appellant.
 OPINION
Appeals from the United States District Court
for the Western District of Washington
John C. Coughenour, District Judge, Presiding
Argued and Submitted
January 11, 2011—Seattle, Washington
Filed March 9, 2011
3297
3298 UNITED STATES v. ERIKSEN
Before: Susan P. Graber and Milan D. Smith, Jr.,
Circuit Judges, and Roger T. Benitez,* District Judge.
Opinion by Judge Milan D. Smith, Jr.
*The Honorable Roger T. Benitez, United States District Judge for the
Southern District of California, sitting by designation.
UNITED STATES v. ERIKSEN 3301
COUNSEL
C. James Frush, Esq., Jack M. Lovejoy, Esq., Cable Langen-
bach Kinerk & Bauer LLP, Seattle, Washington, and David
Allen, Esq., Allen Hansen & Maybrown, Seattle, Washington,
for the defendants-appellants.
Micahel S. Morgan, Esq., Assistant United States Attorney,
Western District of Washington, Seattle, Washington, for the
plaintiff-appellee.
OPINION
M. SMITH, Circuit Judge:
Defendants-Appellants Sigmund Eriksen and Raymond
Eriksen appeal their convictions stemming from their misap-
propriation of employee 401(k) contributions to pay their
company’s operating expenses. Specifically, a jury convicted
each Defendant of two counts of Embezzlement or Conver-
sion of the Funds of an Employment Benefit Plan, in violation
of 18 U.S.C. § 664, and one count of Making False or Mis-
leading Statements in an Employee Retirement Income Secur-
3302 UNITED STATES v. ERIKSEN
ity Act of 1974 (ERISA) Benefit Plan Document that Federal
Law Requires to be Kept, in violation of 18 U.S.C. § 1027.
Defendants claim that the district court erred in several ways.
We address Defendants’ principal assignments of error in this
Opinion. We address Defendants’ other claims of error in a
contemporaneously filed Memorandum Disposition. We
affirm.
FACTUAL AND PROCEDURAL BACKGROUND
I. Lunde Electric Company Pension Plan
Until 2005, when it ceased operations, Lunde Electric
Company (Lunde Electric or the Company) of Seattle, Wash-
ington, was in the business of maritime electrical repair. Sig-
mund Eriksen (Sigmund) served as Lunde Electric’s
Chairman, and his son Raymond Eriksen (Raymond) was
President and Chief Executive Officer.
Sigmund purchased Lunde Electric in 1975. In 1979, the
Company established the Lunde Electric Co., Inc., Profit
Sharing Plan (the Plan) to provide retirement benefits for its
union employees. Sigmund and Raymond served as the Plan’s
trustees. Initially, Lunde Electric was the sole financial con-
tributor to the Plan, and the Plan’s assets were held in a bro-
kerage account at a local bank (the Plan Account). From 1979
until the mid-1990s, Earl Sommerfeld served as the Plan’s
bookkeeper. In 1999, Earl’s son, Brad Sommerfeld, assumed
those responsibilities.
The Plan was amended in 1984 and 1991 (the 1991 Plan).
The government and Defendants sharply disagree as to
whether the Plan was subsequently amended. According to
the government, the Plan was again amended in 1995 and
then restated in 2002. Defendants contend that there is no evi-
dence of either event.
UNITED STATES v. ERIKSEN 3303
A. The 1995 Amendment and 2002 Restatement
According to the government, Article IV of the Plan, titled
“Contribution and Allocation,” was amended in 1995 to add
a 401(k) feature (the 1995 Amendment). The 1995 Amend-
ment replaced contributions made exclusively by the Com-
pany with a system whereby Plan investors—called
“Participants”—contributed a percentage of their paychecks
—called “elective deferrals”—into the Plan. Lunde would
then “match” fifty percent of each Participant’s elective defer-
ral with an employer contribution. Funds in the Plan Account
were pooled and administered by the Eriksens.
According to the government, when the Eriksens added the
401(k) feature, they did not redraft the 1991 Plan; instead,
only Article IV of the 1991 Plan was amended. As evidence
of this change, the government introduced two versions of the
1991 Plan. In the first version, which the government prof-
fered as the original 1991 Plan, Article IV refers only to dis-
cretionary “Employer’s Contribution[s]”: “For each Plan
Year, the Employer shall contribute to the Plan such amount
as shall be determined by the Employer.” However, in the
second document, Article IV sets forth procedures for a “Par-
ticipant’s Salary Reduction Election.” Article 4.2 of that doc-
ument provides, inter alia, that “[e]ach Participant may elect
to defer his Compensation which would have been received
in the Plan Year, but for the deferral election, by up to 10
[percent].” In addition to the documentary evidence, the gov-
ernment presented testimony that the Plan was amended in
1995. For instance, the Plan’s stockbroker testified that new
“trust certification papers” were filed with the Plan’s broker-
age firm in 1995.
On January 1, 2002, the Plan was restated and a new docu-
ment titled “Lunde Electric Company, Inc. 401(k) Profit Shar-
ing Plan” became operative (the 2002 Restatement). Although
the date of the Plan’s effectiveness was not written in one
space provided in the document, several documents signed
3304 UNITED STATES v. ERIKSEN
and dated by Sigmund and Raymond contained information
about the 2002 Restatement’s effective date. These included
a “Consent to Corporate Authorization,” which “RESOLVED
that the form amended 401(k) Profit Sharing Plan and Trust
effective January 1, 2002, presented to this meeting is hereby
approved and adopted.” Additionally, the 2002 Restatement
included a “Supplemental Participation Agreement” dated
January 1, 2002, and signed by Raymond as “Participating
Employer” and by both Raymond and Sigmund as Trustees.
This document also referred to a 401(k) plan.
B. Missing Remittances to the Plan Account
In 1999, Lunde Electric began experiencing financial diffi-
culties and was unable to pay its operating expenses with rev-
enues. The government alleged that, as a result of these
financial problems, the Eriksens caused the Company to stop
remitting elective deferrals to the Plan.
Brad Sommerfeld regularly reviewed the Trust’s brokerage
statements as part of his responsibilities as Plan accountant.
Those statements reflected deposits into and withdrawals
from the Plan Account. Sommerfeld noticed that regular
deposits into the Plan Account were no longer made after
October 1999. Indeed, the only deposit made to the Plan
Account for the 2000 Plan Year was for $10,000, on Decem-
ber 27, 2000. Although money continued to be withheld from
Participants’ paychecks, no deposits were made into the Plan
Account in 2001, in 2002, or from January through March
2003.
From 1999 to 2002, Lunde Electric employed three differ-
ent bookkeepers—Cynthia Halcomb (mid-1990s to 1999),
Brad Mansker (May 2000 to December 2000), and Toni Wun-
sch (December 2000 to 2003). Both Halcomb and Mansker
testified that they would meet with the Eriksens on a regular
basis to decide which bills to pay. According to Mansker,
within a few months of his starting work at the Company, he
UNITED STATES v. ERIKSEN 3305
learned that elective deferrals were not being remitted to the
Plan. Mansker testified that he raised the issue of the out-
standing liability on several occasions, but that the Eriksens
did not direct the Company to make payments to the Plan dur-
ing his tenure. Moreover, starting in 1999, employees’ elec-
tive deferrals were shown as “Receivables” on the Plan’s
balance sheet and reflected as a liability on Lunde Electric’s
books. From 1999 to December 2002, the Plan Account’s
Receivables grew from $35,156.62 to $97,374.68. By 2003,
the Receivables had increased to $103,606; from 1999 to
2003, the Receivables ballooned from 1.47 % of the Plan’s
assets to 15.01%.
On December 5, 2001, the Eriksens participated in a con-
ference call with attorney Ronald Braley. Defendants asked
Braley about the consequences of not funding 401(k) trust
accounts. Braley informed the Eriksens that they could be per-
sonally liable as fiduciaries and, in his own words, informed
them “that while the Department of Labor usually does not
take a keen interest in plans with fewer than 100, if an
employee knew about it and complained to the Department of
Labor, that an investigation may open up and they would have
a more serious issue.” During the conference call, Braley
emphasized that the Eriksens had to pay the unfunded liability
“as soon as possible.” Thereafter, Braley memorialized the
conversation in an email he transmitted to the Eriksens. That
email reads, in part: “Apparently, for the past year and one
half, they have failed to contribute to the 401(k) . . . Plan after
taking elective deferrals from employees.”
On May 2, 2002, Brad Sommerfeld wrote to bookkeeper
Toni Wunsch concerning the Company’s accounting:
As you know the Company is significantly behind in
depositing its 401K contributions. This is a huge
problem because most of the money comes from
employees’ paychecks and the Officers of the Com-
pany and Trustees of the Plan have a fiduciary
3306 UNITED STATES v. ERIKSEN
responsibility to deposit these funds timely (deposits
are due monthly). This is possibly the worst liability
to fall behind on in terms of legal and tax problems.
Sommerfeld testified that he also had a conversation with Sig-
mund about the Plan’s delinquency and that Sigmund stated,
“We’re doing the best we can.”
C. Lunde Electric’s Tax Filings
After 1995, Lunde Electric began providing yearly “Partici-
pant’s Valuation Reports” to employees enrolled in the 401(k)
Plan. These reports purported to show each Participant’s
assets in the Plan and contributions made for the prior Plan
Year. The Valuation Reports were prepared by Brad Sommer-
feld and signed by Raymond. Until 1999, a Statement of Net
Assets, which detailed the total Plan assets, was also delivered
to each Participant. After the 1999 Plan Year, Lunde Electric
ceased providing Statements of Net Assets when it delivered
copies of Valuation Reports to Participants. Nevertheless,
Sommerfeld continued to prepare Statements of Net Assets
for those years, which he provided to the Eriksens.
Lunde Electric filed certain documents with the Internal
Revenue Service (IRS), including a Form 5500, in connection
with its operation of the Plan. Form 5500, titled, “Annual
Return/Report of Employee Benefit Plan,” details contribu-
tions made to an ERISA fund. Brad Sommerfeld prepared the
Form 5500 each year, and either Raymond or Sigmund, as
Plan administrators, signed the document before submitting it
to the IRS.
Among other questions, Form 5500 asks: “Was there a fail-
ure to transmit to the plan any participant contributions within
the time period described in 29 [Code of Federal Regulations
(C.F.R.)] 2510.3-102?” The reference to the Code of Federal
Regulations is to an ERISA regulation titled “Definition of
UNITED STATES v. ERIKSEN 3307
‘plan assets’—participant contributions” (the Plan Asset Reg-
ulation), which provides:
(a)(1) General rule. For purposes of subtitle A and
parts 1 and 4 of subtitle B of title I of ERISA and
section 4975 of the Internal Revenue Code only (but
without any implication for and may not be relied
upon to bar criminal prosecutions under 18 U.S.C.
664), the assets of the plan include amounts (other
than union dues) that a participant or beneficiary
pays to an employer, or amounts that a participant
has withheld from his wages by an employer, for
contribution or repayment of a participant loan to the
plan, as of the earliest date on which such contribu-
tions or repayments can reasonably be segregated
from the employer’s general assets.
....
(b) Maximum time period for pension benefit plans.
(1) . . . [I]n no event shall the date determined pursu-
ant to paragraph (a)(1) of this section occur later
than the 15th business day of the month following
the month in which the participant contribution or
participant loan repayment amounts are received by
the employer (in the case of amounts that a partici-
pant or beneficiary pays to an employer) or the 15th
business day of the month following the month in
which such amounts would otherwise have been
payable to the participant in cash (in the case of
amounts withheld by an employer from a partici-
pant’s wages).
29 C.F.R. § 2510.3-102(a)(1), (b)(1). For the 1999, 2000, and
2001 tax years, the Form 5500s filed by Lunde Electric indi-
cated that all Participant contributions had been transmitted.
3308 UNITED STATES v. ERIKSEN
Sommerfeld testified that this was not true and that he had fal-
sified the three forms because:
The answer yes is a flag to the Internal Revenue Ser-
vice that the plan is delinquent or behind on their
contributions. And that may—or would result in
either an IRS audit or a Department of Labor investi-
gation. And I was afraid that I would be blamed for
blowing the whistle or causing either one of those
actions to take place and cause harm to the company.
D. Department of Labor Investigation and Indictment
In early 2003, bookkeeper Wunsch discussed her concerns
about the 401(k) Plan with the Eriksens. Thereafter, Wunsch
contacted the Department of Labor (DOL) and met with an
investigator. In March 2003, the DOL issued a grand jury sub-
poena to Lunde Electric. After the April 2003 subpoena was
served, Lunde Electric resumed remitting elective deferrals to
the Plan. By October 2004, Lunde Electric had lowered its
outstanding obligations to the Plan from approximately
$105,000 to $1,000. When Lunde Electric ceased operations
in April 2005, all Plan Participants received their full 401(k)
distribution.
In 2008, based on the events detailed supra, Sigmund and
Raymond were indicted on one count of Conspiracy to
Embezzle $70,120.55 from an ERISA Employee Plan, in vio-
lation of 18 U.S.C. § 371 (Count 1); seventeen counts of
Embezzlement or Conversion from an ERISA Employee Ben-
efit Plan, in violation of 18 U.S.C. §§ 664 and 2 (Counts 2-
18), and three counts of Making False or Misleading State-
ments in an ERISA Benefit Plan Document that Federal Law
Requires to be Kept, in violation of 18 U.S.C. §§ 1027 and 2
(Counts 19-21).
II. Trial and Sentencing
The Eriksens’ jury trial commenced on October 5, 2009.
Raymond testified that he did not play a role in preparing any
UNITED STATES v. ERIKSEN 3309
of the Plan’s documents and that he did not remember signing
the 1995 Amendment establishing the 401(k). According to
Raymond, neither he nor Sigmund was involved in the prepa-
ration or review of the Valuation Reports, the Form 5500s, or
the Plan’s Statements of Net Assets. Raymond testified that
he was unaware that employee elective deferrals were not
being forwarded to the Plan Account in 1999, 2000, and 2001.
However, Raymond acknowledged making personal contribu-
tions to the 401(k) starting in October 1999.
At trial, the Eriksens presented the testimony of William
Whitman, an expert witness on ERISA issues. Although
Whitman testified that there are no “hard deadlines” for when
an employer must contribute the employer portion of a 401(k)
plan, he did not testify about when an employer must remit
employee contributions. According to Whitman, an amend-
ment to an ERISA plan must be “in writing” and executed by
a corporate officer and the plan’s trustees.
The jury returned identical verdicts for both Defendants,
convicting them on Counts 17 and 18, for failing to remit
elective deferrals from December 2002 and March 2003 pay-
checks. The jury also convicted Defendants on Count 21,
which concerned making a false statement in the 2001 Valua-
tion Report. The jury deadlocked on Counts 9 through 16 and
20 and acquitted Defendants on Counts 1 through 8 and 19.
Defendants moved for judgments of acquittal, which the dis-
trict court denied in an order dated November 4, 2009.
The district court sentenced both Defendants to two years
of probation, a $20,000 fine, 240 hours of community service,
and the mandatory special assessment of $300. Defendants
timely appeal.
DISCUSSION
Defendants seek to overturn the jury’s verdict on the
grounds that there was insufficient evidence of criminal intent
3310 UNITED STATES v. ERIKSEN
or that Lunde Electric established the 401(k) Plan, and that
the government improperly referred to the Plan Asset Regula-
tion at trial. We are not persuaded.
I. Embezzlement or Conversion of the Elective Deferrals
A. Scope of the Offense
[1] 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 con-
nected 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 wel-
fare benefit plan or employee pension benefit plan”
means any employee benefit plan subject to any pro-
vision of title I of the Employee Retirement Income
Security Act of 1974.
18 U.S.C. § 664. We have held that the operative terms “em-
bezzles” 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 appropri-
ation of property by a person to whom such property has been
entrusted, or into whose hands it has lawfully come.” Wox-
berg, 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
UNITED STATES v. ERIKSEN 3311
manner or to an unauthorized extent.” Andreen, 628 F.2d at1241 (citing Morissette v. United States, 342 U.S. 246, 272
(1952)).
We have also recognized that § 664 does more than recapit-
ulate common-law offenses. Because § 664 and other
pension-protection laws, see, e.g., 29 U.S.C. § 501(c) (prohib-
iting embezzlement from a labor organization fund), are
aimed at “preserv[ing] welfare and pension funds for the pro-
tection 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 fidu-
ciary purposes and objectives of the union funds or
pension plan, as set forth by statutes, bylaws, char-
ters, or trust documents which govern uses of the
funds in question. Whatever imprecision attends this
definition is remedied substantially by the require-
ment 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).
[2] We have consistently declined invitations to engraft
additional elements onto, or create affirmative defenses for,
§ 664 violations. In Andreen, we rejected the “participant ben-
efit” theory by holding that so long as a fiduciary used plan
3312 UNITED STATES v. ERIKSEN
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 unautho-
rized 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 knowl-
edge 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 circum-
stantial 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 beneficia-
ries. 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
UNITED STATES v. ERIKSEN 3313
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 with-
drawals, 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” inter-
ests 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.”).
[3] Following retrial in light of other errors, the Mett
defendants returned to us in United States v. Wiseman, claim-
ing 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 conten-
tions. With respect to the mistake-of-law argument, we held
that, although “ ‘the defendant must knowingly act wrong-
fully 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-
3314 UNITED STATES v. ERIKSEN
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 gener-
ally 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).
B. Sufficiency of the Evidence
The jury convicted Defendants of two § 664 crimes: Counts
17 and 18. Count 17 concerned $1,192.40 of employee elec-
tive deferrals withheld in December 2002. Count 18 involved
$1,000.40 in deferrals from March 2003. The district court
gave the same jury instruction for both of these counts, requir-
ing proof beyond a reasonable doubt that:
First, the Lunde Electric Company 401(k) Plan was
established or maintained as an employee pension
benefit plan subject to Title I of the [ERISA]; and
Second, the defendant either:
(a) embezzled or stole funds of the plan; or
(b) unlawfully and willfully abstracted or
converted funds of the plan to his own use
or the use of another[.]
The district court defined “embezzled,” “stole,” “converted,”
and “abstracted.”
Defendants contend that there was insufficient evidence to
support these elements. “Evidence is sufficient for conviction
if, viewing the evidence in the light most favorable to the
prosecution, any rational trier of fact could have found the
essential elements of the crime beyond a reasonable doubt.”
UNITED STATES v. ERIKSEN 3315
United States v. Bush, 626 F.3d 527, 533 (9th Cir. 2010)
(internal quotation marks omitted).
In a mid-trial motion for a directed verdict, Defendants
asserted that the government had not established the existence
of the Plan and thus claimed that any deferrals withheld were
actually discretionary employer contributions. This argument
was not renewed in Defendants’ post-trial Fed. R. Crim. P. 29
motion. Defendants also assert that the failure to remit elec-
tive deferrals within the time frame established by the DOL’s
Plan Asset Regulation, 29 C.F.R. § 2510.3-102(b)(1), is not
tantamount to embezzlement or conversion and that the gov-
ernment’s references to the Plan Asset Regulation were preju-
dicial. Because Defendants’ Rule 29 motion regarding Counts
17 and 18 was limited to an argument about mens rea, our
review is for plain error. United States v. Alvarez-Valenzuela,
231 F.3d 1198, 1200-01 (9th Cir. 2000) (“[W]e interpret Rule
29(a) to suggest that failure to renew the motion at the end of
trial does not mean that it has been waived, but only that a
higher standard of review is to be imposed. [We] may review
an unrenewed motion for judgment of acquittal, but only to
prevent a manifest miscarriage of justice, or for plain error.”).
1. Establishment of the Lunde Electric 401(k) Plan
Defendants assert that there was insufficient proof that the
Plan contained a 401(k) feature. They argue that all ERISA
plans contain an amendment procedure and that “[t]hese . . .
procedures, once set forth in a benefit plan, constrain the
employer from amending the plan by other means.” Winter-
rowd v. Am. Gen. Annuity Ins. Co., 321 F.3d 933, 937 (9th
Cir. 2003) (citing Curtiss-Wright Corp. v. Schoonejongen,
514 U.S. 73, 85 (1995)). According to Defendants’ theory, the
government had to introduce a properly executed version of
the 1995 Amendment. Because the government does not have
such a document, Defendants argue, the elective deferrals
were actually discretionary “employer contributions” that do
not become “Plan Assets” until they are remitted to the Plan.
3316 UNITED STATES v. ERIKSEN
Defendants’ argument regarding the validity of the 1995
Amendment is a red herring. Defendants were convicted only
for their failure to remit deferrals after the 2002 Restatement.
Even though the Form 5500s submitted to the IRS by Lunde
Electric, the testimony of Brad Sommerfeld, and the email by
attorney Braley all indicated that the 401(k) Plan existed
before 2002, because Counts 17 and 18 concerned conduct
that occurred after the 2002 Plan Restatement, we need only
consider that document. The Eriksens do not dispute that the
1991 Plan was governed by Title I of ERISA, but contend that
the evidence did not allow the conclusion that the Plan was
thereafter amended or restated.
[4] “Generally, whether a plan is subject to Title I of
ERISA is an issue of fact to be decided by the jury, guided
by applicable legal principles.” United States v. Wofford, 560
F.3d 341, 347 (5th Cir. 2009) (citing United States v. Hel-
bling, 209 F.3d 226, 239 (3d Cir. 2000)). The amendment
procedures for any ERISA benefit plan must be specified by
the employer and identify the persons with the “authority to
amend.” Winterrowd, 321 F.3d at 937 (citing 29 U.S.C.
§ 1102(b)(3)). Here, the 1991 Plan, at Section 10.6, specified
that amending the Plan “shall only be by the written action of
each and every Participating Employer and with the consent
of the Trustee where such consent is necessary.” To show
such an amendment occurred by at least 2002, the government
introduced a written copy of the 2002 Restatement, which
included a 401(k) provision and was signed by Raymond as
“Employer” and “Trustee” and by Sigmund as “Trustee.” The
government also introduced addenda referring to the effective
date of the Restatement as January 1, 2002, as well as a “Con-
sent to Corporate Action” by Lunde Electric that approved the
“amended 401(k) Profit Sharing Plan . . . effective January 1,
2002.” Any of these documents alone was competent evi-
dence to allow the jury to conclude that the Plan had been
restated in 2002 with a 401(k) plan. Accordingly, there was
sufficient evidence for the jury to conclude that the 1991 Plan
UNITED STATES v. ERIKSEN 3317
had been restated before the Eriksens retained their employ-
ees’ elective deferrals in the Company’s general account.
2. Embezzlement, Conversion, or Unauthorized Use
of Funds
The second element of § 664 requires the jury to find that
a defendant willfully embezzled, converted, or misappropri-
ated the funds of a pension plan. Andreen, 628 F.2d at 1241.
Defendants concede that the funds were not remitted to the
Plan Account before the DOL investigation. However, they
contend that their keeping elective deferrals for longer than
fifteen days—a deadline specified in the Plan Asset
Regulation—is not tantamount to embezzlement or conver-
sion. According to Defendants, the government, by referenc-
ing the Plan Asset Regulation, misled the jury into concluding
otherwise. In support of their argument, Defendants ask us to
consider the holdings of United States v. Christo, 614 F.2d
486 (5th Cir. 1980), and United States v. Wolf, 820 F.2d 1499(9th Cir. 1987).
Although both Christo and Wolf address the dangers of
“bootstrapping” a civil violation into a criminal one, neither
case concerns § 664 crimes, nor do their holdings apply here.
Both Christo and Wolf concerned prosecutions against bank
executives for misapplication of bank funds, in violation of 18
U.S.C. § 656. Wolf, 820 F.2d at 1501; Christo, 614 F.2d at
489.
In Christo, the misapplication charge was based on a bank
officer’s repeatedly overdrawing his checking account. At the
time, 12 U.S.C. § 375a prohibited a bank from extending a
loan of more than $5,000 to one of its officers. Christo, 614
F.2d at 488 n.2, 490. The trial court quoted § 375a to the jury
and further instructed the jury that it could consider violations
of § 375a in connection with the criminal misapplication
charges. Id. at 491. The Fifth Circuit reversed the defendant’s
misapplication conviction, observing:
3318 UNITED STATES v. ERIKSEN
A conviction, resulting from the government’s
attempt to bootstrap a series of checking account
overdrafts, a civil regulatory violation, into an equal
amount of misapplication felonies, cannot be
allowed to stand. The government’s evidence and
argument concerning violations of § 375a imper-
missibly infected the very purpose for which the trial
was being conducted . . . .
Id. at 492.
In Wolf, we relied on Christo to reverse convictions against
a bank executive for misapplying bank funds and making
false entries in a bank record. The executive had, among other
acts, failed to disclose required information about the benefi-
ciaries of his bank loans. Wolf, 820 F.2d at 1503. We faulted
the government for basing its misapplication charges on a
civil banking regulation that imposes a duty on bank employ-
ees to inform the bank’s board of directors about the purpose
of a loan. During Wolf’s trial, the government’s expert wit-
ness testified that the defendant’s failure to disclose he was a
beneficiary of some of the loans he disbursed violated Federal
Reserve Regulation O (12 C.F.R. § 215). We held that the ref-
erences to the Regulation were impermissible:
Unlike references to [other civil violations which
occurred during the trial], the references to Regula-
tion O cannot be dismissed as being simply back-
ground information. The references were a key part
of the government’s case on the misapplication and
false entry counts. . . .
To supply the missing element of the false entry
and misapplication charges, the government turned
to Regulation O. Through its expert witness the gov-
ernment established that Regulation O imposed a
duty on [the defendant] to inform the bank’s direc-
tors that he had an interest in the loans . . . . In sum,
UNITED STATES v. ERIKSEN 3319
the government used Regulation O to supply a cru-
cial element of the misapplication and false entry
charges.
Id. at 1505 (emphasis added). Thus, under the logic of Christo
and Wolf, it is impermissible to use the violation of a civil
statute to ipso facto “supply a crucial element” of a criminal
offense.
[5] Contrary to Christo and Wolf, the Plan Asset Regula-
tion played an inconsequential or, more likely, no role in
Defendants’ convictions. Importantly, the Plan Asset Regula-
tion does not create a reporting or other affirmative obligation
on an employer nor does it prohibit certain behaviors under
threat of civil sanction; rather, the regulation simply defines
“plan asset”: “the assets of the plan include amounts . . . that
a participant or beneficiary pays to an employer.” 29 C.F.R.
§ 2510.3-102(a)(1) (emphasis added). While one could selec-
tively excerpt and rewrite portions of the regulation to create
the appearance that it requires employers to remit their elec-
tive deferrals, the regulation does not create any such obliga-
tion. Indeed, the obligation not to use other people’s money
for purposes they have not authorized is traceable more fairly
to antiquity than to the Plan Asset Regulation. Thus, contrary
to the facts in Wolf, none of the elements of Counts 17 or 18
was established at trial, or could be established, by bootstrap-
ping a violation of the regulation. Unlike in Christo, the regu-
lation did not mislead the jury in its deliberations, as it was
not even a factor for the jurors’ consideration.
[6] The government did not contend that it was Defen-
dants’ failure to remit deferrals within fifteen days that consti-
tuted their crime. Rather, it was the fact that employee
contributions were never remitted from January 1, 2002, until
the DOL became involved, but were, instead, used to pay
business expenses, as recounted by Brad Sommerfeld and oth-
ers, that formed the factual and legal basis for the govern-
ment’s case. Conversion is a simple offense that
3320 UNITED STATES v. ERIKSEN
“encompasses the use of property, placed in one’s custody for
a limited purpose, in an unauthorized manner or to an unau-
thorized extent.” Andreen, 628 F.2d at 1241. When Defen-
dants commingled their employees’ contributions with the
Company’s assets to prop up their failing business, they inten-
tionally used their employee’s assets for an unauthorized pur-
pose. Moreover, they sent Participants account statements
showing 401(k) balances which were, in fact, non-existent.
Defendants’ acts were “substantially inconsistent with the
fiduciary purposes and objectives of the union funds or pen-
sion plan, as set forth by statutes, bylaws, charters, or trust
documents which govern uses of the funds in question.” Id.As fiduciaries of the money given to them by their employees,
Defendants were entrusted with custody of their employees’
money for the sole purpose of remitting it to the 401(k) Plan;
the Defendants’ decision to deviate, be it to bet on horse races
or pay other bills, is the wilful criminal misappropriation pun-
ished by § 664.
[7] Finally, Defendants’ argument regarding the absence of
intent is undercut by the evidence that both Defendants were
alerted repeatedly about their obligation to remit the deferrals.
Moreover, the government showed that Defendants hid their
actions from employees by, for instance, withholding State-
ments of Net Assets in yearly investor reports.
[8] Accordingly, there was sufficient evidence to support
Defendants’ convictions on Counts 17 and 18.
II. False or Misleading Statements in a Required ERISA
Document
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 “Addi-
UNITED STATES v. ERIKSEN 3321
tions During Year,” indicated that both employee deferrals
and employer contributions had been made to the Partici-
pants’ accounts. According to the government’s expert wit-
ness, 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).
[9] We have held that § 1027 prohibits: (1) “any know-
ingly 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.
[10] Contrary to Defendants’ contention, materiality is not
a prerequisite for, or an element of, a false statement convic-
tion. 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 pro-
hibits “any knowingly made false statements or representa-
tions 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 dur-
ing 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
3322 UNITED STATES v. ERIKSEN
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.
[11] Turning to the central question of whether the Valua-
tion Reports were required by the ERISA, we begin by exam-
ining the Act’s record-retention requirements:
Every person . . . shall maintain records on the mat-
ters of which disclosure is required which will pro-
vide 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 applica-
ble 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 docu-
ment that provided “ ‘in sufficient detail the necessary basic
UNITED STATES v. ERIKSEN 3323
information’ ” to allow another ERISA form to be “verif[ied],
explain[ed], clarif[ied], and check[ed] for accuracy and com-
pleteness.” Id. at 1483-84 (quoting 29 U.S.C. § 1027).
[12] 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 defen-
dant’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 Compa-
ny’s decisions about which bills should be paid with its dwin-
dling cash revenues.
[13] Defendants’ post-hoc rationalizations—in particular
that, because Participants were ultimately repaid, these mis-
statements 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
3324 UNITED STATES v. ERIKSEN
have more information available to plan beneficiaries so they
can enforce their own rights.” 840 F.2d at 1484. While Defen-
dants, 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 under-
mined if Defendants escaped liability for providing patently
false account statements to Plan Participants.
[14] Accordingly, we hold there was sufficient evidence to
support Defendants’ convictions on Count 21.
CONCLUSION
For the foregoing reasons, Defendants’ convictions and
sentences are AFFIRMED.