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General investigative authority.

725. What is the Department of Labor's general investigative authority?

ERISA Section 504(a) grants the Secretary of Labor broad discretion to investigate whether any person has violated or is about to violate any provision of Title I of ERISA (Protection of Employee Benefit Rights), or its attendant regulations. Such investigations may require the submission of reports, books and records, and the filing of data in support of any information required to be filed with the Department of Labor (DOL).

The DOL may also "enter such places, inspect such books and records and question such persons" as it deems necessary to determine the facts relative to the investigation. (1) This authority extends beyond plans and plan sponsors--it also includes service providers to plans and financial institutions (e.g., banks, savings and loans, insurance companies and investment management companies) who conduct business with ERISA covered plans.

The DOL may not require any plan to submit to an investigation more than once in any 12-month period, unless the DOL has "reasonable cause" to believe that there may be a violation of Title I of ERISA, or its attendant regulations. (2)

The enforcement of Title I of ERISA is handled by the Employee Benefits Security Administration (EBSA). The EBSA has regional and district offices throughout the United States. Under the DOL's 1990 Enforcement Strategy Implementation Plan, the DOL, in an effort to allocate its limited resources in the most effective manner, so as to protect the largest number of plan participants and plan assets, has developed an enforcement strategy designed to:

1. Identify and investigate those areas most prone to abuse;

2. Detect and obtain correction of ERISA violations;

3. Respond to participant complaints, public inquiries and referrals received from other governmental agencies;

4. Disseminate information and promote voluntary compliance with Title I of ERISA; and

5. Establish a presence in the regulated benefits community.

Under ERISA Section 504(c), the DOL has administrative subpoena authority regarding testimony and the production of books, records, and documents; however, the DOL is required to seek a grant of authority from the Department of Justice to conduct criminal investigations (see Chapter XIII for details). In criminal investigations, the DOL has no subpoena authority. If the DOL requires a subpoena in the course of a criminal investigation, it must request it through the Department of Justice, specifically, a U.S. Attorney in the district in which the investigation is being conducted.

726. Does the Department of Labor possess the power to subpoena?

Yes. In accordance with its investigative authority pursuant to ERISA Section 504(c), the Department of Labor (DOL) has the power to subpoena when conducting investigations under Title I of ERISA (Protection of Employee Benefit Rights). This subpoena power is in accordance with the provisions of Sections 9 and 10 of the Federal Trade Commission Act, which relate to the attendance of witnesses and the production of books, records, and documents, and is applicable to the jurisdiction, powers, and duties of the DOL or its designees. Accordingly, these provisions provide the DOL with: (1) the authority to administer oaths; (2) the power to compel the attendance of witnesses; and (3) the access to and the right to copy documentary evidence. (1)

The authority of the DOL to execute and issue administrative subpoenas is delegated to the regional directors of the Employee Benefits Security Administration under the guidance and direction of the Director of Enforcement. Through the use of their subpoena powers, the regional directors issue subpoenas as a method of requiring an individual or entity to produce certain documents and records and to appear for the purpose of providing sworn testimony in connection with an investigation. Prior to its issuance, a subpoena is reviewed by a regional solicitor of the DOL for its legal sufficiency. (2)

727. What is a subpoena duces tecum?

A subpoena duces tecum is a command to a person or organization to appear at a specified time and place and: (1) to bring certain designated documents in his custody or control; (2) to produce the documents; and (3) to testify as to their authenticity, as well as any other matter concerning the documents to which proper inquiry is made. (1)

728. What is a subpoena ad testificandum?

A subpoena ad testificandum is a command to a named individual or corporation to appear at a specified time and place to give oral testimony under oath. A verbatim transcript is made of this testimony. (2)

729. What is an accommodation subpoena?

An accommodation subpoena is a subpoena issued by the EBSA to persons or entities who are willing to testify or to produce the documents requested but are concerned about protecting themselves from any potential adverse consequences of doing so without a legal requirement. These subpoenas are often issued by the EBSA as an accommodation to service providers and financial institutions for the foregoing reasons. (3)

730. What methods are used to serve the subpoena?

Subpoenas are generally served by certified or registered mail, with return receipt requested. The Employee Benefits Security Administration's (EBSA) investigators or auditors often arrange service by prior telephone conversation or through the individual's or entity's legal counsel. In all cases, a letter, with references to any earlier telephone discussions, accompanies the subpoena. (4)

In instances where it proves impractical or impossible to serve the subpoena on an individual by mail, EBSA may arrange to have the subpoena served personally, and a copy also may be sent by mail. The DOL instructs its investigators and auditors that personal service is complete when the subpoena is delivered: (1) directly to the individual or entity; (2) to the individual's residence with a person of suitable age and discretion residing there full-time, such as a spouse; or (3) to the person in charge at the office or place of business of the entity. (5)

731. What types of investigations are conducted by the Department of Labor?

The Department of Labor (DOL) conducts investigations of plans, service providers, plan sponsors and multiemployer organizations. Investigations of these entities are classified by the DOL, depending upon the actual issues being investigated. The classifications are based upon the chapters within the EBSA Enforcement Manual. The DOL refers to these investigations as: Program 53, Program 48, Program 52, and Program 47.

Program 53--Targeting and Limited Reviews

Most investigations are initially opened as Program 53 investigations. The initial on-site investigations for the majority of DOL field audits are conducted as Program 53 investigations (known internally as a "P-53"). (See Q 755 though Q 759 for the details of how the DOL conducts an initial on-site investigation.) The purpose of a P-53 is to investigate the issues upon which the case was targeted and opened (as identified on a Case Opening Form 205), as well as the bonding, reporting, and disclosure obligations applicable to all plans. (See Q 755 for details on how the DOL targets investigations). If a P-53 reveals evidence that a fiduciary violation has occurred, the investigation is converted to a Program 48 ("P-48") investigation. P-53 investigations that fail to uncover any outstanding fiduciary or criminal investigations are quickly closed, and a brief case closing letter is issued. (1)

Program 48--Fiduciary Investigation

Chapter 48 of the EBSA Enforcement Manual details the procedures to be followed in conducting fiduciary investigations. If, in the course of targeting an investigation, the DOL has sufficient evidence to believe that a fiduciary violation has occurred, they will open the investigation as a P-48 and dispense with the formality (and paperwork) involved in a P-53 investigation. P-48 investigations are usually very detailed and involve an in-depth analysis of plan records as well as interviews of, and requests for records from, plan service providers. If the DOL uncovers alleged fiduciary violations of ERISA, the targets of the investigation will likely receive a Voluntary Compliance (VC) letter from the DOL which details: (1) the facts of the alleged violations identified by the DOL; (2) the provisions of ERISA that are alleged to have been violated; and (3) a request that the target of the investigation provide to the DOL, within 10 days, a written explanation of the target's plan to reverse the outstanding alleged violations and restore to the plan any alleged losses and lost opportunity costs.

In cases of extreme or egregious violations of ERISA, the target of a P-48 investigation may receive from the Pension Benefits Security Division (PBSD) of the DOL, or from the DOL's Regional Solicitor, a Notice of Intent to Litigate. At this point, the DOL is of the opinion that achieving voluntary compliance from the investigative target is highly unlikely, or that the outstanding violations are of a nature that warrant immediate judicial intervention in order to protect plan assets for the benefit of participants and beneficiaries. (See Q 782 regarding information on how investigation subjects should proceed in responding to the DOL voluntary compliance letter). (2)

Program 52--Criminal Investigation

If a P-53 discovers evidence of criminal activity regarding the subject plan, the evidence will be documented and presented to the United States Attorney's Office for the jurisdiction in which the plan is located. (3) The DOL will present evidence of criminal activity regarding employee benefit plans to the U.S. Attorney along with a request for a Grant of Authority to conduct a criminal investigation. (This is necessary because the DOL does not, by itself, have the authority to issue subpoenas in criminal matters.) All subpoenas issued in the course of a P-52 are issued from the Department of Justice and are carried out by the DOL.

If a P-52 investigation establishes sufficient evidence that criminal activity has occurred in regard to the subject employee benefit plan, and that a certain subject or subjects have committed the violations, the Department of Justice will present the results of the investigation to a federal grand jury for the purpose of securing an indictment against the subject or subjects with respect to whom the investigation has established probable cause to believe that they have committed the crimes for which the indictments were sought.

The most common criminal acts for which indictments are sought under a P-52 investigation are:

1. Theft or embezzlement from an employee benefit plan;

2. Making of false statements and concealment of facts in relation to ERISA required documents;

3. Acceptance or solicitation of funds to influence the operation of employee benefit plans; and

4. Mail fraud.

Program 47--Prohibited Person Investigation

The final type of investigation routinely conducted by the DOL is outlined in Chapter 47 of the EBSA Enforcement Manual. That chapter deals with the investigation of certain persons holding certain positions in relation to an employee benefit plan, although they are statutorily barred from serving in such a capacity. This prohibited person investigation is referred to within the DOL as a "P-47" investigation. This chapter is guided by the statutory provisions of ERISA Section 411, which states that "[n]o person who has been convicted of, or has been imprisoned as a result of his conviction for, robbery, bribery, extortion, embezzlement, fraud, grand larceny, burglary, arson, a felony violation of federal or State law" involving controlled substances, "murder, rape, kidnapping, perjury, assault with intent to kill" or any crime under the Investment Company Act of 1940, may serve or be permitted to serve:

1. As an administrator, fiduciary, officer, trustee, custodian, counsel, agent, employee, or representative in any capacity of an employee benefit plan;

2. As a consultant or advisor to an employee benefit plan, including, but not limited to, any entity whose activities are, in whole or substantial part, devoted to providing goods or services to any employee benefit plan; or

3. In any capacity that involves decision making authority or custody or control of the monies, funds, assets, or property of any employee benefit plan.

Practitioner's Pointer: This prohibition under ERISA Section 411 is not permanent. It is a restriction that is in place for 13 years after the conviction, or after the term of incarceration, whichever is later. The 13-year restriction can be circumvented if the sentencing judge (in federal court) or a U.S. District court judge (for a state level conviction) has determined that the subject serving in a restricted capacity would not be contrary to ERISA's provision regarding the protection of employee benefit rights. (1) The court reviewing the restoration request must hold a hearing and provide notice by certified mail to the state, county, and federal prosecuting officials in the jurisdiction(s) in which the conviction took place.

If the P-47 investigation establishes that such a prohibited person is serving an employee benefit plan in one of the statutorily defined positions, he may be fined (not more than $10,000) or imprisoned (for not more than five years) or both.

(1.) ERISA Secs. 504(a)(1), 504(a)(2).

(2.) ERISA Sec. 504(b).

(1.) ERISA Sec. 504(c).

(2.) EBSA Enforcement Manual, Ch. 33, pp. 1-3.

(1.) EBSA Enforcement Manual, Ch. 33, p. 1.

(2.) EBSA Enforcement Manual, Ch. 33, p. 1.

(3.) EBSA Enforcement Manual, Ch. 33, p. 1.

(4.) See EBSA Enforcement Manual, Ch. 33, Figures 1, 2, 3, 4, and 5 for model letters.

(5.) EBSA Enforcement Manual, Ch. 33 pp. 3-4.

(1.) EBSA Enforcement Manual, Ch. 53.

(2.) EBSA Enforcement Manual, Ch. 48.

(3.) EBSA Enforcement Manual, Ch. 52.
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Publication:ERISA Facts
Date:Jan 1, 2010
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