Embezzler’s 401k is off limits to victim employer

Recently, in the matter of Richard Todd Thomas v. James S. Bostwick, the Northern District of California rejected a motion to dismiss, allowing a convicted embezzler to pursue retirement funds retained by his former employer (the victim of his crimes).

Thomas was an employee of James S. Bostwick, a Professional Corporation (“Bostwick, Inc.”) from 1996 to 2005. During this time, the employer made contributions to the retirement plan for the employee’s benefit.  In December 2005, Bostwick Inc. filed a civil action against Thomas for embezzlement.  In October 2006, the court awarded a judgement of almost $20 million.  This was followed by a criminal proceeding against Thomas, during which approximately $9 million was awarded for restitution of the embezzled funds.  When the plan was terminated, the company retained Thomas’ $22,000 account balance as a partial payment against the outstanding judgment.  In refusing to grant the defendant’s motion to dismiss, the court rejected the argument that the employer could appropriately seize the funds under the arguments set forth.

 

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