People vs. Janklow, day one

Discussion in 'Bay Area Bikers' started by Dan Carter, Dec 2, 2003.

  1. Dan Carter

    Rich Guest

    Perhaps that's the name he gives his dick.
    R, UB
    Rich, Dec 11, 2003
    1. Advertisements

  2. Dan Carter

    Erik Astrup Guest


    Erik Astrup, Dec 12, 2003
    1. Advertisements

  3. I know they can't be garnished while held in the fund, but I'm not so sure
    that a charging order can't be granted that will allow any distribution from
    the plan to be taken upon distribution to Janklow. At that point it is
    income to him, and no longer a protected pension. However, I am not
    certain I am right about this, and I'm too lazy to go look it up at the
    See above.
    REInvestments, Dec 12, 2003
  4. er, Right you are!

    In this case, a car passenger might have had a chance (and the honorable
    Janklow would probably have been killed by the impact).
    Jason O'Rourke, Dec 12, 2003
  5. The NFL has always had the reputation of having the worst pensions for their
    retired players, so I tried to figure this one out.

    Many articles list it at 30k, 25k, and 16k. A transcript in the civil trial
    estimated that starting in 2002, OJ would be getting $1910 a month from the
    players pension plan. Expected lifetime value: $175k.
    Darrel Green will set a record in 13 years (when he turns 55) by getting
    a pension payment of $5805/mo.

    Are annuities also protected from judgements? OJ definitely isn't getting it
    from the league.
    Jason O'Rourke, Dec 12, 2003
  6. Well OJ is currently collecting his pension and none of it is getting
    garnished, income schmincome apparently is the rule of law. Perhaps
    only in CA however.
    Demetrius XXIV and the Gladiatores, Dec 12, 2003
  7. Looks like a qualified plan under Federal Law is exempt in many circumstance
    from garnishment, although there are numerous exceptions.

    Looks like it's a bit of work to get to the money. But it appears to me
    that there is a QDRO exception which would allow a representative of the
    children to invade for child support, among other potential avenues of

    From there, I'd actually have to do some thinking, which I'm not required to
    do as much now that I'm a building jockey.. so you'll have to do your own
    thinking. : - )

    See below:

    Here's a situation in which a Bankruptcy estate was able to convert a
    retirement plan into funds for Creditors:

    "The Plan Administrator raises a "red herring" in its second argument. The
    Plan Administrator contends that if this Court enforces the clear provisions
    of the Bankruptcy Code that this would be an improper distribution of the
    retirement fund and it would lose its tax exempt status. Apparently the Plan
    Administrator is arguing that if he has to turn over to the Trustee the
    Debtor's interest in the fund, this would destroy the tax exempt status of
    the fund for all the other thousands of employees of Atlantic Richfield
    Company. The Plan Administrator cites no authority for this draconian result
    other than private letter rulings of the Internal Revenue Service issued
    some 10 years ago. These letters state that any unauthorized disbursement
    would disqualify an entire plan from tax exempt status.

    This argument has been addressed by other courts and rejected. See Regan v.
    Ross, 691 F.2d 81 (2nd Cir.1982); In re DiPiazza, 29 B.R. 916

    The rationale of these decisions is that 29 U.S.C. s 1144(d) 1979 provides
    in substance that nothing in the ERISA statute shall be construed to alter,
    amend, modify, invalidate, impair or supersede any law of the United States.
    Since it is clear that pension funds are part of the Debtor's estate, unless
    they are part of spendthrift trust, any provision of ERISA that prevents a
    distribution to a trustee in bankruptcy would fail.

    A separate order will be entered directing the Plan Administrator to turn
    the Debtor's interest in the pension over to the Trustee in bankruptcy. This
    order will also adopt the view of the Debtors and will not order them to
    turn over property that is not in their possession."

    And this is the public policy argument:

    "[O]ur holding furthers another important policy underlying ERISA: uniform
    national treatment of pension benefits. [citation omitted]. Construing
    "applicable nonbankruptcy law" to include federal law ensures that the
    security of a debtor's pension benefits will be governed by ERISA, not left
    to the vagaries of state spendthrift trust law.(8)

    The breadth of the Supreme Court's holding in Patterson is underscored by
    its reliance on its earlier decision in Guidry v. Sheet Metal Workers
    Pension Plan.(9) In Guidry, a labor union attempted to impose a constructive
    trust on funds held in a pension plan of a union official who breached his
    fiduciary duty and embezzled union funds. In rejecting the union's equitable
    arguments to the contrary, the Supreme Court stated that ERISA "reflects a
    considered congressional policy choice, a decision to safeguard a stream of
    income for pensioners (and their dependents, who may be and perhaps usually
    are, blameless), even if that decision prevents others from securing relief
    for the wrongs done them."(10) Thus, the exclusion of Section 541(c)(2)
    applies with equal force to the honest as well as dishonest debtor.

    Defining an ERISA-Qualified Plan

    Notwithstanding the Supreme Court's strong endorsement of the use of pension
    plans in Patterson, some retirement plans are more protected than others.
    For one, practitioners should anticipate that trustees and creditors will
    focus their attacks on the formal requirements of ERISA pension plans. If a
    particular pension plan fails to satisfy the statutory requirements, the
    plan may lose its protected status and result in a windfall to the
    bankruptcy estate.

    The case law has been slow to develop in this area largely because of the
    complexity of the laws involved. Most of the reported decisions involving
    ERISA and bankruptcy issues have failed to clearly articulate what is
    exactly required to establish a valid ERISA pension plan. Many simply accept
    the Internal Revenue Service's (IRS) determination that a plan is
    "qualified" or "nonqualified" and begin their analysis from that point.(11)

    One important exception to the dearth of case law is the opinion in In re
    Hall.(12) In that case, the debtor was the president and sole shareholder of
    a printing company. The corporation established a pension plan, which at the
    time of its inception was qualified under the Internal Revenue Code (IRC)
    and ERISA and contained an antialienation provision. Because of the
    corporation's financial difficulties, payments on behalf of the
    corporation's employees were suspended five years before the commencement of
    the debtor's bankruptcy case and were never reinstated.

    In analyzing whether the pension plan was qualified at the time that the
    debtor filed his bankruptcy petition, the court began by noting that even
    though the Supreme Court conclusively decided that an "ERISA-qualified" plan
    was not part of the bankruptcy estate, it did not address what is or is not
    an ERISA-qualified plan. Relying on the Sixth Circuit's decision in In re
    Lucas,(13) which predated but was consistent with the Patterson opinion, the
    court held that an ERISA-qualified plan must be (1) subject to ERISA; (2)
    tax-qualified under Section 401 of the IRC; and (3) include an
    antialienation provision.(14)

    Coverage by ERISA

    In discussing the first element, the court noted that a pension plan subject
    to ERISA is, by definition, a plan that (1) provides retirement income to
    employees; or (2) results in a deferral of income by employees for periods
    extending to the termination of covered employment or beyond. Pursuant to
    rule-making authority the Secretary of Labor narrowed the definition of
    "employee" to exclude an individual and his or her spouse who wholly owns a
    trade or business, whether incorporated or unincorporated. Relying on the
    decision in In re Witwer,(15) which had substantially similar facts, the
    court held that the debtor and his spouse, the only participants in the
    plan, were not employees and, thus, the plan was not ERISA-qualified. As a
    result, it held that the pension plan was not excluded from the bankruptcy
    estate pursuant to Section 541(c)(2).

    Tax-Qualified Under IRC Section 401. Given its decision on the question of
    whether the plan was subject to ERISA, the Hall court next focused its
    discussion on the plan's tax qualification under Section 401(a) of the IRC,
    which it characterized as a "legal mountain." Such legal complexities often
    contain cracks that can cause the entire structure to collapse on the
    unwary. Such was the case for the debtor in Hall.(16)

    Because the plan only benefited two out of six present and former employees,
    the court concluded that the plan did not satisfy the minimum participation
    rule and was not tax-qualified. Therefore, it was not exemptable under
    Section 522(d)(10)(E) either.

    As the opinion in Hall demonstrates, there are numerous legal requirements
    under ERISA and the IRC that pension plans must satisfy in order to qualify
    for the exclusion of Section 541(c)(2). Not all courts agree that such
    avenues of attack should be available. For example, in In re Youngblood,(17)
    a husband and wife filed a Chapter 7 petition and claimed as exempt the
    proceeds of their ERISA-qualified plan that had been rolled over into an
    IRA. A creditor objected to the exemption on the grounds that the funds were
    not "qualified" under the IRC and, therefore, were not exempt under the
    particular state statute.

    When the husband's corporation established the pension plan, the IRS issued
    a favorable determination letter, ruling that the plan was "qualified" under
    Section 401 of the IRC. More than 10 years later, it issued another
    favorable determination letter based on proposed amendments to the plan.
    Just prior to the termination of the plan shortly thereafter, the IRS
    audited the plan and assessed penalties in the form of taxes but did not
    revoke its earlier determination that the plan was qualified. When the plan
    was subsequently terminated, the husband "rolled over" his distribution into
    an IRA.

    In support of its objection, the creditor argued that the plan was, in fact,
    not qualified. It claimed that the plan was used to, among other things,
    provide working capital for the husband's corporation and to make business
    loans to the debtor. It also claimed, and the bankruptcy court agreed, that
    the bankruptcy court had the authority to make its own determination as to
    whether the plan was qualified.It then determined that the plan was not
    qualified and denied the exemption. The district court affirmed this

    On appeal, the Fifth Circuit reversed. In deciding whether the bankruptcy
    court had the authority to determine whether the plan was qualified, the
    court stated:

    We answer this question in the negative. We are persuaded that the
    legislature intended for its own state courts (or bankruptcy courts applying
    Texas law) to defer to the IRS in determining whether a retirement plan is
    "qualified" under the Internal Revenue Code. We see no reason that the
    legislature would want its courts, which are inexperienced in federal tax
    matters, to second-guess the IRS in such a complex, specialized area. We
    find it much more reasonable to assume that the legislature contemplated
    creating an exemption from seizure for a debtor's retirement funds that
    could be simply and readily determined by deferring to the federal tax
    treatment of those funds. Moreover, we do not believe that the legislature
    wanted to adopt a scheme that invites frequent, unseemly, conflicting
    decisions between the state court or bankruptcy court, and the IRS, such as
    occurred in this case.(18)

    While the decision in Youngblood involved a state law exemption, the Fifth
    Circuit went out of its way in the quoted passage to point out that not only
    state courts but also bankruptcy courts must defer to determinations of the
    IRS as to whether a particular plan is or is not a qualified plan. The
    import of the Youngblood holding is that once the IRS has made the
    determination that a plan is qualified, that decision is final unless it is
    revoked by the IRS. While this approach has the benefit of giving debtors
    the comfort of being able to rely on the IRS's determinations, other courts,
    such as those in Hall and Lane,(19) will be more inclined to scrutinize a
    debtor's compliance with the legal formalities of such plans, particularly
    if there is a perception that the plan at issue is being used in an abusive

    Inclusion of Antialienation Provisions

    With respect to the third requirement concerning antialienation provisions,
    the reasoning of In re Witwer is instructive. On similar facts and analysis
    as in Hall the Witwer court concluded that the debtor's pension plan was not
    subject to ERISA. Nonetheless, the debtor claimed that it had an
    antialienation provision consistent with Section 401(a)(13). The debtor
    argued that Section 401(a)(13) was "the coordinate section" of Section
    1056(d) of ERISA and constituted "applicable non-bankruptcy law" under
    Section 541(c)(2), as interpreted by the Supreme Court in Patterson. In
    rejecting the debtor's argument, the court reasoned:

    The Debtor correctly states that under Patterson, § 541(c)(2) encompasses
    any relevant nonbankruptcy law so long as the transfer restrictions are
    "enforceable". [Patterson, 112 S. Ct. at 2247.] Under ERISA a plan
    participant, beneficiary, or fiduciary, or the Secretary of Labor may file a
    civil action to "enjoin any act or practice" which violates ERISA or the
    terms of the plan. 29 U.S.C. §§ 1132(a)(3), (a)(5). The "coordinate section"
    of the I.R.C., however, does not provide for a similar remedy.

    The provisions of I.R.C. § 401(a) relate solely to the criteria for tax
    qualification under the Internal Revenue Code. Although a transfer in
    violation of the required antialienation provision could result in adverse
    tax consequences I.R.C. §401(a) does not appear to create any substantive
    rights that a beneficiary or participant of a qualified retirement trust can

    Thus, in order to obtain the protection afforded pension plans under
    Patterson, planners should ensure that the plan is subject to ERISA,
    tax-qualified under the IRC, and contains an enforceable antialienation

    Other Vulnerable Aspects

    Even if these requirements are met, some debtors' plans may still be
    vulnerable. One area of concern is attachment of federal tax liens. In
    United States v. Sawaf(21) the IRS secured a judgment against the defendants
    for the amount of their assessed tax deficiency. In order to enforce that
    judgment, the IRS proceeded under the Federal Debt Collection Procedure Act
    (FDCPA). Section 3205(a) of that act allows the government to collect a
    judgment owed to it by garnishing property ". . . in which the debtor has a
    substantial nonexempt interest and which is in the possession, custody or
    control of a person other than the debtor."

    Citing Section 1056(d) of ERISA and Patterson, the defendants claimed that
    the pension plan was exempt. In rejecting the defendants' argument, the
    court noted that the only express statutory exception from the
    antialienation provision of ERISA was for qualified domestic relations
    orders. However, the court relied on IRS Regulation Section
    1.401(a)-13(b)(2), which provides that an antialienation provision pursuant
    to Section 401(a)(13) of the IRC does not preclude (1) the enforcement of a
    federal tax levy made pursuant to Section 6331 or (2) the collection by the
    United States on a judgment resulting from an unpaid tax assessment. The
    court went on to explain that its holding was consistent with ERISA, the
    IRC, and the FDCPA.(22)

    Unlike a federal tax levy however, a state tax agency may not levy on an
    ERISA plan, because ERISA preempts state tax law. As discussed subsequently,
    if the plan is not an ERISA plan, the state exemption statute will apply.

    As noted, the only statutory exception to the protection afforded by an
    ERISA-qualified plan is with respect to court orders for spousal and child
    support. In order to create an exception to ERISA's antialienation rule,
    Congress created a statutory exception for Qualified Domestic Relations
    Orders (QDRO), which allows retirement plan balances to be assigned to
    either a spouse, child, or other dependent of the participant.(23)

    Distribution of Proceeds

    Another concern relates to invasion of the corpus of the pension plan, as
    was the case in Velis v. Kardanis.(24) The debtor in that case had, among
    other property, approximately $184,000 in an ERISA-qualified pension plan.
    Shortly after the filing of his Chapter 11 petition, the debtor "borrowed"
    substantial funds from his pension plan. The debtor claimed that the amounts
    that he borrowed retained their excluded status under Section 541(c)(2)
    notwithstanding such distribution. In concluding that such assets lost their
    protected status, the Third Circuit stated:

    With respect to the pension plan and the Keogh plan, we conclude that, to
    the extent the assets in these plans have already been distributed to or for
    the benefit of the debtor, the debtor no longer has available the
    protections which might otherwise have been accorded under the ERISA
    statute. Section 541(c)(2) requires recognition of restrictions upon
    transfer which are enforceable by law; it does not operate to require
    non-recognition of transfers which have already occurred, nor does it apply
    to assets in the possession of the debtor without restrictions. Here, it is
    undisputed that, shortly after the bankruptcy petition was filed, the debtor
    withdrew substantially all of the funds in his pension plan, Keogh plan and
    the IRA, and used the money to purchase the cooperative apartment--not as
    pension plan assets, or as part of the debtor's estate, but for his own
    purposes. To that extent, there can be no doubt that these moneys came into
    the unrestricted possession of the debtor, and were no longer pension

    The decision in Velis was expanded upon in Trucking Employees of North
    Jersey Welfare Fund, Inc. v. Colville.(26) In Colville, a union employee
    received overpayments of $44,000 for disability payments. When he refused to
    return the payments, the union fund filed suit and withheld his retirement
    benefits. The district court granted the union fund judgment for the amount
    of the overpayments, but refused to place a constructive trust on Colville's
    retirement funds and ordered the union fund to release them to him.

    When Colville received the funds, he placed them in a personal bank account.
    The union fund then served a writ of execution on the account. However,
    relying on the Patterson decision, the district court refused to order
    turnover of the funds. On appeal, the Third Circuit reversed. Relying on 26
    CFR § 1.401(a)-13(c)(1) and the Tenth Circuit's decision after remand in
    Guidry v. Sheet Metal Workers Pension Plan,(27) the court held that a plan's
    antialienation provision applies to future payments on the plan's corpus,
    but not to amounts paid out to the participant. As a result, Colville had to
    turn over the funds in his account to satisfy the union fund's judgment.(28)
    Even though ERISA does not protect plan distributions, state exemptions may
    provide some relief. Some states exempt IRA rollovers from qualified
    plans,(29) while others protect such proceeds provided distributions remain
    segregated from other funds.(30)

    Finally, a debtor should also be aware of transactions that may be subject
    to avoidance by a trustee. The court in Velis alluded to this possibility.
    In discussing the protection given to pension plans, it stated that

    [w]e believe it reasonable to conclude that Congress intended to provide
    protection against the claims of creditors for a person's interest in
    pension plans, unless vulnerable to challenge as fraudulent conveyances or
    voidable preferences. Presumably substantial and unusual contributions to a
    self-settled pension trust made within the preference period, or with intent
    to defraud creditors, should receive no protection under either §541(c)(2)
    or 522(d)(10)(E).(31)
    REInvestments, Dec 12, 2003
  8. Dan Carter

    Tim Morrow Guest

    Nice job of research, Jason.
    Tim Morrow, Dec 12, 2003
  9. You started it, sweet cheeks.
    Chris Buckley, Dec 12, 2003
  10. Now you're just becoming a bore.
    Chris Buckley, Dec 12, 2003
  11. I expect he may have a pension coming from South Dakota for his years as
    governor, but he does not qualify for a Federal pension by serving one
    year in Congress. I believe it takes five years to qualify.

    However, he may establish that he was on official business at the time
    of the crash, and any judgement against him in a civil proceeding may be
    paid by the U.S. taxpayers.
    Steven McCollom, Dec 12, 2003
  12. I don't think so. Negligence might be covered, but recklessnesss isn't
    likely to be covered as being within the scope of his employment. He
    apparently speeds intentionally, and has made a public statement to that
    end. He was going 70 when he went through the Stop. Probably outside of
    the scope of his employment, and not covered by the taxpayers.

    Just my opinion, but I don't practice law anymore, so who knows?
    REInvestments, Dec 13, 2003
  13. Dan Carter

    James Clark Guest

    Read this clown's December 2003 column (pg. 20) and decide for yourself.
    James Clark, Dec 14, 2003
    1. Advertisements

Ask a Question

Want to reply to this thread or ask your own question?

You'll need to choose a username for the site, which only take a couple of moments (here). After that, you can post your question and our members will help you out.