Ex-Shkreli lawyer can't shield retirement funds after fraud conviction

August 24, 20228:37 PM UTCUpdated ago

Former drug company executive Martin Shkreli exits U.S. District Court after being convicted of securities fraud, in the Brooklyn borough of New York City, U.S., August 4, 2017. REUTERS/Carlo Allegri

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Greebel's retirement accounts fair game for restitution -court
2nd Circuit returns case to trial judge to see if 10% early-withdrawal tax penalty applies

(Reuters) - The U.S. Justice Department can tap into retirement accounts belonging to a convicted former lawyer for ex-pharma executive Martin Shkreli to help pay $10.4 million in restitution to victims of their fraud scheme, a U.S. appeals court ruled Wednesday.

Prosecutors have authority under the federal Mandatory Victims Restitution Act to pursue garnishment of accounts belonging to the lawyer, Evan Greebel, who was convicted in 2017 on charges that included conspiracy to commit securities fraud, the 2nd U.S. Circuit Court of Appeals ruled.

Greebel, a former partner at law firm Katten Muchin Rosenman, was sentenced to 18 months in prison for helping Shkreli bilk investors at his drug company Retrophin Inc. Shkreli was sentenced to seven years on related charges. Both men have been released from custody.

In the appeal, Greebel had argued he had no unilateral right to withdraw funds from his accounts to make available to victims and that the money was shielded by a provision in federal employee retirement income laws. He also argued the federal Consumer Credit Protection Act and a 25% garnishment cap applied in his case.

Reed Brodsky of Gibson, Dunn & Crutcher, a lawyer for Greebel, did not immediately respond to a message seeking comment on the ruling. Greebel also could not immediately be reached.

A spokesman for the U.S. Attorney's Office for the Eastern District of New York declined to comment.

In a partial win for Greebel, the appeals panel said a judge must assess whether federal prosecutors' garnishment will trigger a 10% early-withdrawal tax and affect the amount the government can seize.

Prosecutors have said it is unlikely Greebel will be required to pay the early withdrawal penalty.

The government pointed to a U.S. Tax Court ruling that said the tax does not apply in circumstances where a defendant's retirement plan is subject to forfeiture as part of a criminal plea.

Greebel pleaded not guilty but was convicted at trial in Brooklyn federal court in 2017.

When he resigned from the New York state bar in April 2021, a state appeals court said in an order that Greebel acknowledged his "convictions constitute 'serious crimes'" and that "he cannot successfully defend against these facts and circumstances."

The case is United States v. Greebel, 2nd U.S. Circuit Court of Appeals, No. 21-993.

For the U.S.: Thomas Price of the U.S. Attorney's Office for the Eastern District of New York

For Greebel: Reed Brodsky of Gibson, Dunn & Crutcher

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