Plan Fiduciary Sentenced for 401(k) Plan Embezzlement

He pleaded guilty after the DOL found he fraudulently collected between $15,000 and $40,000 from plan participants’ accounts.

It wasn’t a cyber breach that affected participants’ assets in the R&R Steel LLC 401(k) Plan, but rather embezzlement from a plan fiduciary.

The Department of Labor (DOL) announced that the company’s owner and the retirement plan’s only named trustee and administrator pleaded guilty to one count of theft or embezzlement from an employee benefit plan and one count of mail fraud. A federal judge sentenced him to 18 months in prison.

Under terms of a plea agreement, Judge Timothy S. Black of the U.S. District Court for the Southern District of Ohio ordered the plan fiduciary to forfeit $25,000 to the government and to pay an amount of restitution to affected participants that will be determined at a later hearing. The fiduciary must also pay an assessment of $200 and serve three years of supervised release following his prison term.

The DOL says an investigation by its Employee Benefits Security Administration (EBSA) found the fiduciary fraudulently collected between $15,000 and $40,000 from the company’s 401(k) plan by forging participant signatures and using funds for his personal benefit. Investigators found he forged multiple participants’ signatures on distribution forms for the R&R Steel LLC 401(k) Plan and changed the participants’ addresses to that of his own or his company’s address. As the plan’s sole fiduciary, he then signed the distribution forms and authorized the cash distribution.

The checks arrived at the company or at the plan fiduciary’s personal address, and he then forged checks with participants’ signatures and converted the funds for his personal use by cashing the checks at local banks and markets. In some cases, the victims were non-English speaking or had limited English proficiency.

The count of mail fraud relates to the fiduciary fraudulently receiving Occupational Safety and Health Administration (OSHA) training certificates that he used to meet the requirements necessary to obtain a $450,000 subcontract to perform work on a Cincinnati commercial development in October 2015.

The case is U.S. v. Ron Craig Estes, Case No: 1:19-cr-00139-TSB.