Seemingly untouchable pension funds now may be a cash cow for federal prosecutors wanting to tap white-collar defendants for substantial restitution to victims, says the National Law Journal. A ruling last month by the U.S. Court of Appeals for the 9th Circuit is the first appellate decision in the nation to hold that the Mandatory Victims Restitution Act (MVRA) of 1996 trumps federal retirement law that bars confiscation of pensions to pay debts. Opening the way to garnish pension funds may cause problems for defense lawyers because a restitution order can hang on 20 years after a prison term. At least five district courts have ruled similarly to the 9th Circuit in U.S. v. Novak.
For the wealthy defendant facing significant victim-restitution claims, putting pension money in play will change early plea negotiation strategy and will likely create more litigation regarding when, and how much, money can be garnished. Some fear it could prompt indigent defendants to liquidate pensions to pay defense and investigation costs rather than risk losing them in restitution orders. “I see a scenario in which there will be a lot of compromising going on,” said Leslie Caldwell, head of white-collar defense for Morgan, Lewis & Bockius, formerly of the U.S. Justice Department’s Enron task force. “Prosecutors are not trying to take every cent. It will be a negotiating point,” she said.