Employer Suit in Sham Divorce Pension Scheme Dismissed

October 19, 2009 (PLANSPONSOR.com) - A civil suit by an employer accusing employees of arranging for sham divorces so the spouses could collect pension benefits while the employees kept working has now been thrown out of court.

U.S. District Judge Gray Miller ruled in the suit filed in federal court in Atlanta that federal law does not allow pension administrators to consider an employee’s motivation for obtaining a divorce while making the administrator’s benefits payout determination, according to an Associated Press news report.

Miller accepted the request of the nine Continental Airlines pilots accused in the sham divorce scheme to dismiss the case.

There was no immediate comment from Houston-based Continental, which says it paid out between $10 million and $11 million in suspicious pension distributions, the story said (see Airline Alleges Sham Divorces are Pension Scam ).

The airline says some of the pilots concealed the divorces from children and friends, then remarried their spouses after getting the money.