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Updated by Jacob Zamansky on Nov 07, 2018
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5 Real-Life Examples of 401(k) Fraud

When most people open a 401(k) at work, they aren’t concerned about losing their life savings to fraud. Contributing to a 401(k) is supposed to be safe – a way to ensure that you will have the money you need to live comfortably when you reach retirement age. Unfortunately, in today’s world, 401(k) fraud is a very real concern. Here are just a few of the numerous stories of retirement fraud scams targeting employees of all ages, many of whom end up losing everything they worked so hard to earn.

1

Company CEO Convicted of Embezzling Employees’ 401(k) Contributions

In one recent example, the CEO of a technology consulting firm was convicted for embezzling $126,000 from the firm’s 401(k) and profit-sharing plan. According to one of the U.S. Attorneys involved in the case, the CEO, “used the stolen money to pay for his vacation home, pool renovation, and otherwise fund his own lavish lifestyle.” This included $20,000 in rent for his personal residence and vacation home, leases for four vehicles, designer clothes and luxury travel.

2

HR Director Re-Directs Employees’ Contributions to His Own Account

dollars of employees’ employer contributions to his own personal account. As reported, the HR director limited the additional funds so that they would not exceed the annual contribution limit. The fraud scheme came to light when one of the employees whose money was stolen discovered a discrepancy between their employer contributions and their tax records.

3

Asset Manager Uses “Other Funds” Account to Siphon Employees’ Retirement Savings

In a similar type of fraud scheme, the asset manager of a company’s 401(k) plan deposited a portion of the participating employees’ contributions into an account labeled, “Other Funds.” This account was in the asset manager’s individual name; and, when the asset manager died, the fund was almost entirely empty.

4

HR Employee Diverts Retirement Plan Contributions Then Flees

In yet another case of trusted personnel absconding with employees’ retirement plan contributions, an HR employee responsible for managing payroll was discovered to have diverted other employees’ contributions to a personal account over a six-month period. The employee fled the country before the funds could be returned.

5

Plan Administrator Pockets Returns from a Single 401(k) Investment

Finally, in a slightly more-advanced 401(k) fraud scheme, a plan administrator sought to avoid detection by pulling investment earnings from a single investment fund. Instead of depositing investment returns into plan participants’ accounts, he redirected them to his own personal account. The fraud was discovered when an audit revealed that participants were consistently seeing abnormally-low rates of return from the fund in question. If you have questions about suspicious activity on your account statements or believe that you may be a victim of 401(k) fraud, we encourage you to contact us for a free, no-obligation consultation. To speak with an experienced investment fraud lawyer in confidence, call (212) 742-1414 or tell us about your situation online today.