U.S. Dist.. Judge Stanwood R. Duval (E.D. La., Clinton) ruled Nov. 28 that Audrey Gaudet, the wife of a union boss who had been convicted of embezzling funds from retirement plans of the Sheet Metal Workers Int’l Ass’n , cannot collect the pension funds that her husband accrued because he embezzled more than he was owed by the plan. To allow Gaudet “in essence, to receive double benefits under the plan could penalize innocent beneficiaries and would defy common sense and the fundamental protections” under the Employee Retirement Income Security Act (ERISA).
Gaudet’s husband Stanley Gaudet was president of the Sheet Metal Workers Local 11 in New Orleans. Between 1983-89, he embezzled funds from the local and its employee benefit plans and was convicted in 1991 on 22 counts of embezzlement and theft. He was sentenced to more than 18 years in prison. The district court ordered him to pay restitution in the amount of $2,750,539 to SMW by relinquishing his rights to the pension funds. In 1991, the Sheet Workers’ Nat’l Pension Fund denied the embezzler’s request for retirement benefits, saying it would breach their fiduciary duty to pay a pension benefit to someone who embezzled more than he was owed in benefits.
In May 2001, the Gaudets entered into a property separation agreement, which created a qualified domestic relations order and established Audrey Gaudet as the alternate payee of half of Stanley Gaudet’s pension benefits “due and owing.” She claimed the domestic relations order entitled her to half of the benefits that accrued to her husband under the retirement plans. She claims that she never knew about her husband embezzling funds.
However, Duval said “[under] a logical interpretation of that order, if Stanley is not entitled to any benefits under the pension plan (because he has already received more than his pension), Audrey can not claim any independent right to more benefits under the plan.” Duval added that this is the first situation where “a fiduciary breached his duty to the plan itself, stole more money than he would be entitled to under his pension plan, and then claimed entitlement to even more retirement funds from the plan (whether the funds be for himself or his spouse).”
Audrey Gaudet argued that ERISA’s anti-alienation provision prohibited an offset of her husband’s pension benefits against the amount he owed. The court said there was no issue of offset, since the pension fund had no obligation to Stanley Gaudet after he embezzled from the plan. [BNA 12/13/01]