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Hey fatwalleters,

Here is a sordid story that perhaps you can offer some advice on. Last week myself and a few dozen employees receive an email from the CEO of our penny stock staffing Corporation - that they are terminating all employees and seeking bankruptcy protection. There was some warning, as a week before we received word that our healthcare insurance had been cancelled effective the month before, yet for the most part we were are all taken for surprise.

In the aftermath of this one of the office employees (in accounting) who was also been terminated, alludes to "accounting problems" such as 401K contributions being withheld but not deposited to retirement plans. Lo and behold when I called the plan, no 401K contributions have been made to my plan since May, despite it being withheld from my paycheck. Just to be clear, the contributions are solely my own - there is no employer match. From the IRS website it says that that 401k contributions should be made "no later than the 15th business day of the month following the payday. “

The amounts missing is about 3500. For this issue I have contacted the Employee Benefits Security Administration and filed a claim. It seems highly...fraudulent, but I don't know what else I can/should do?

In light of the 401k contributions being wrong on my checks, I'm worried that taxes too weren't or won't be paid. I contacted the IRS, but they said I'd have to wait to Feb. till I get my w2 in order to check that.

The other big issue is pay for the time I worked before the CEO sent the email terminating employment.
The CEO has been in contact with some of the ex-employees, saying we will be paid if/when one of the clients pays them...I contacted the local labor dept. and was told to call back when the pay period has passed. Two days from now. Despite the email from the CEO the corporation has not yet official filed for bankruptcy...this according to the bankruptcy court where they are Incorporated. As I understand, if/when they file for bankruptcy, I will need to submit a proof of claim to the court...and hope to be paid?

I am potentially trying to recover almost 10K, between wages, 401k and medical deductions that were made, but for which there was no coverage. Is there something more I could/should be doing besides contacting ESBA and waiting for the company to file bankruptcy?

In the meantime the CEO has formed a new company, an LLC. Some former office employees, an accountant and sales person have also formed their own company...formed 2 weeks before we were terminated. Both seemingly are attempting, separately, to gain something by picking up the pieces of the relationship between the clients and the former employees. It's all seems very shady. I hesitate to retain a lawyer and be out of pocket even more money, but I wonder if the 'fraud' is so apparent if there isn’t something more I should/could be doing?

Appreciate any advice or ideas, thanks in advance.

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Thanks so much for following up. Here's hoping the ccheck clears

ensignlee (Apr. 23, 2014 @ 6:36a) |

Most people would not have pushed this through and would have gave up. Good on ya.

saladdin (Apr. 23, 2014 @ 7:50a) |

Let this be a lesson to all the embezzlers and crooks out there: Sure, you might get away with millions of tax-free doll... (more)

Psycho41 (Apr. 30, 2014 @ 8:00p) |


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Somebody far more knowledgable on these matters will provide more information but isn't it a criminal offense of those involved within the company to not make the 401K contributions into the employee accounts and not making right? Pretty sure that is fraud?

I do know my own company accidentally (truly) missed 401K transfers into accounts and I spent time reading about strict rules on how "making things right" were governed... but it seems like your company outright stole from you.

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Sue before they file bankruptcy

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"For people who suspect their plan has been abandoned or someone has tampered with their fund, the Department of Labor offers this resource http://www.dol.gov/ebsa/faqs/faq-abplanreg.html. You can also call them at 1.866.444.EBSA."

From: http://blogs.smartmoney.com/encore/2011/09/16/help-my-boss-stole...

Might be somewhere to start.

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Contact local Police and get ceo and related responsible individuals arrested for theft .

Asap before they file bk. Insist this is not civil , it's crminal theft

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beatme said:   Sue before they file bankruptcy
Won't help or give any priority. The bk filing will put an automatic stay. It would only help if the company is "bluffing" about filing bk, sounds like they soon will

The only direct action op can take is getting the people responsible arrested for theft

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A friend of mine had this happen too. Indeed he lost all the money, plus his taxes weren't paid. I think he pursued all the possible legal paths, most of which are futile. If it were me and I could find the CEO, I'd get a baseball bat and my cousin Marvin. Not suggesting that for you.

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Thanks sucksisstaples. Why does you suggest before for they file bankrupcy. So that Assets aren't frozen? To prevent them from filing Bankrupcy?

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guidefatwallet9 said:   Thanks sucksisstaples. Why does you suggest before for they file bankrupcy. So that Assets aren't frozen? To prevent them from filing Bankrupcy?
Because the police won't do anything if they see the bk paperwork

As of right now, it's just a theft situation.

People tend to get "motivated" to pay people what they are owed when the cops knock on their door . Or put steel bracelets on them

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What state is the OP in? Recourse may be highly dependent on particular state laws.

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I'd consider calling FBI, SEC (if it was publicly traded) or other federal agencies that handle financial crimes.

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"The amounts missing is about 3500K"

3.5 Million ?

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mainomega said:   "The amounts missing is about 3500K"

3.5 Million ?


LOL my first thought. I think that is above and beyond the $17k employee limit?

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mainomega said:   "The amounts missing is about 3500K"

3.5 Million ?


Sorry my bad, its 3500 dollars.

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SUCKISSTAPLES said:   guidefatwallet9 said:   Thanks sucksisstaples. Why does you suggest before for they file bankruptcy. So that Assets aren't frozen? To prevent them from filing Bankruptcy?
Because the police won't do anything if they see the bk paperwork

As of right now, it's just a theft situation.

People tend to get "motivated" to pay people what they are owed when the cops knock on their door . Or put steel bracelets on them


Hi suckisstaples,

I took your advice, went to the police station and filed a report for theft. It was a surprisingly pleasant experience. The cops agreed it was a criminal issue of theft, took the information I provided, said they would present it to the local prosecutor and I would hear more in a couple of days. They said this could potentially lead to investigators getting access to the company books to find out what happened to the money and who was responsible. They said not to worry about the bankruptcy and that it would be criminal theft even if they had filed or if they do in a couple of days. It is a small town precinct and I went late at night....That might account for their being so agreeable and willing to take the report without any argument. Not sure what will happen next, but will keep this post updated.

Btw, I am a long time fan of your posts and am sincerely appreciative of all the information/knowledge you share here. Thank you.

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Now might be the time to file a lawsuit against the new LLC, claiming the CEO used your funds to fund the new LLC, (fraud, fiduciary duties)..
He did not pay for it with M&Ms, he Diverted funds for the new LLC.
You need to check on this.
May be great leverage, to get your funds.

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guidefatwallet9 said:   SUCKISSTAPLES said:   guidefatwallet9 said:   Thanks sucksisstaples. Why does you suggest before for they file bankruptcy. So that Assets aren't frozen? To prevent them from filing Bankruptcy?
Because the police won't do anything if they see the bk paperwork

As of right now, it's just a theft situation.

People tend to get "motivated" to pay people what they are owed when the cops knock on their door . Or put steel bracelets on them


Hi suckisstaples,

I took your advice, went to the police station and filed a report for theft. It was a surprisingly pleasant experience. The cops agreed it was a criminal issue of theft, took the information I provided, said they would present it to the local prosecutor and I would hear more in a couple of days. They said this could potentially lead to investigators getting access to the company books to find out what happened to the money and who was responsible. They said not to worry about the bankruptcy and that it would be criminal theft even if they had filed or if they do in a couple of days. It is a small town precinct and I went late at night....That might account for their being so agreeable and willing to take the report without any argument. Not sure what will happen next, but will keep this post updated.

Btw, I am a long time fan of your posts and am sincerely appreciative of all the information/knowledge you share here. Thank you.

It's actually not that good a sign that they just took a report to forward to the DA.

Would have been better if they actually rolled a unit to have a talk with whoever you stated was the perpetrator

It sounds like you talked about bk (bad bad move, nothing has been filed) and If you didn't mention a specific person was responsible for the theft , that's probably why they didn't go out to rough them up.

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Since you already did ther police report I would follow up with the DAs office to make sure they have it and understand whats going on. Also have you got other employees contact information? If so have them file complaints as well. Most DAs are elected and its near election time for many. More people = more votes/news/goodwill/etc...

After you contact the DA and other former employees call the news and point out the fraud. Get them on a slow news day.

Cliffs: be the squeaky wheel.

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True, the more people who go to the police , the greater chance the DA might actually do something

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guidefatwallet9 said:   

I took your advice,


This is so rare for FW. Nice job!

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How did that Steve Miller song go? Take the money and run... That's what your boss did....

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aadam101 said:   guidefatwallet9 said:   

I took your advice,


This is so rare for FW. Nice job!


I know, right! Someone actually spelled advice right.

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Might you be able to write off this loss on your taxes? I know it isn't the best alternative, but assuming all other avenues fail, you could get some of your money back this way.

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khw1 said:   Might you be able to write off this loss on your taxes? I know it isn't the best alternative, but assuming all other avenues fail, you could get some of your money back this way.

Well wouldn't you only write off your taxable income? As I understand it via rough #'s: You have $50k income and owe 25% tax, you write off 10k from the theft, and only owe 25% of 40k, saving $2.5k of taxes.

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I'd alert the IRS. They offer rewards when people report wayward funds.

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guidefatwallet9 said:   ...In the meantime the CEO has formed a new company, an LLC. Some former office employees, an accountant and sales person have also formed their own company...formed 2 weeks before we were terminated. Both seemingly are attempting, separately, to gain something by picking up the pieces of the relationship between the clients and the former employees...The 401k money is important, but I'd also be concerned about my livelihood. Have you joined forces with any of these groups or formed a group of your own to pick up these old clients?

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Every company that provides a 401k plan needs to carry an ERISA Bond. This is a bond that covers fraud by the fiduciaries which appears to be the case here.

Call your plan administrator, they should have information about your company's ERISA bond and they can help you file a claim (or put you in touch with the insurance company that issued the bond).

Hope this helps.. I was the fiduciary for the 401k plan on my prior company so i know a little about it.

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Great info for at least recovering the 401k

The police report may also help to show fraud

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Also, make sure you contact the DOL. They helped my friends get their money back. Here is the DOL press release.

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Could the OP go to the magistrate and swear out a warrant himself if the police/DA start dragging their feet?

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Here is the latest update.

This morning I got a call from the CEO who had not returned my calls yesterday. I also got a call from a Sgt. saying they had spoken to the CEO.

The CEO in essence said, you are going to be paid the 401k money, as CEO he is ultimately responsible for it, he mentioned being aware of the issue in July (before I reported it to him) and he alluded to the money not being put in anyone’s pockets but it being caught up in the financial issues of the company. He alluded to wanting to pay that money back but there being issues with the financial company the corporation uses. He seemed to be asking for patience and trust that the money will be paid...soon.

I explained that the missing 401k monies are separate from the financial issues the company is going through and I only saw a resolution in two scenarios. The money was misdirected accidentally and I would be paid back without delay. Or there was a theft of the money and the process for retrieving it to treat as criminal issue either at the local or federal level. I said I would send an email summing up our talk. All in all is was a civil conversation.

I also spoke with a police Sgt who said they had spoken to the CEO. They said he admitted there was a money issue with the 401K and that he was making every effort to pay it back. The Sgt. seemed to be somewhat tolerant of the delay in getting the CEO to cough up the money due to the financial issues the company is having. I'm not sure that’s exactly appropriate. The Sgt suggested other employees file reports as well so that it can be added to the investigation.

One open question I have is whether the jurisdiction for this is the local police or the EBSA – Employee Benefits Security Administration? Some googling around seems to suggest that taking money from a 401k is a federal crime and would be investigated by the EBSA. In any case I am reporting it to them too. Will reach out to the local DA and see I they help with any info.

Thanks for all the great advice.

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guidefatwallet9 said:   The CEO in essence said, you are going to be paid the 401k money, as CEO he is ultimately responsible for it, he mentioned being aware of the issue in July (before I reported it to him) and he alluded to the money not being put in anyone’s pockets but it being caught up in the financial issues of the company. He alluded to wanting to pay that money back but there being issues with the financial company the corporation uses. He seemed to be asking for patience and trust that the money will be paid...soon. He's lying. Money is long gone. Explanation doesn't even make sense.

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Don't quote me on this, but I believe if taxes were withheld from your paycheck, that is a debt between the company and the IRS, not you and the IRS.

Regardless, make sure you save ALL copies of paycheck stubs to substantiate how much they withheld for everything. That is probably your key evidence for all your claims (taxes, 401k contributions, insurance premiums, etc...). Also, make sure you retain in your possession all contact information for as many employees as possible. Once the company computers/servers go down, no telling what information you will no longer have access to that could help in the future.

Good Luck

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I'm a lawyer, but I don't specialize in the issues that you are dealing with. If it were me, I would start with the police, who quite frankly are ill equipped to handle the problem. I would also go directly to the states attorney for your the county that you live in. I would also report the matter to your states attorney general. (this has not been mentioned in this thread, but they have special lawyers that handle fraud) Then it looks like you have a federal solution as well. I agree with another poster if this was just an accounting problem, the money could be paid to you right away. Sounds like the owner was robbing Peter to pay Paul. Good luck. Also, if you have to go to civil court, try to band together as many employees as possible to defer costs. It doesn't sound like a class action because there aren't enough people, but if it was one lawyer representing all of you it would only be 1 filing fee, 1 legal fee, and the costs of litigation would be split among all the plaintiffs instead of just you (quite frankly for $3500 minus attorneys fees and costs you aren't looking at much in your pocket)

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guidefatwallet9 said:   Here is the latest update.

This morning I got a call from the CEO who had not returned my calls yesterday. I also got a call from a Sgt. saying they had spoken to the CEO.

The CEO in essence said, you are going to be paid the 401k money, as CEO he is ultimately responsible for it, he mentioned being aware of the issue in July (before I reported it to him) and he alluded to the money not being put in anyone’s pockets but it being caught up in the financial issues of the company. He alluded to wanting to pay that money back but there being issues with the financial company the corporation uses. He seemed to be asking for patience and trust that the money will be paid...soon.

I explained that the missing 401k monies are separate from the financial issues the company is going through and I only saw a resolution in two scenarios. The money was misdirected accidentally and I would be paid back without delay. Or there was a theft of the money and the process for retrieving it to treat as criminal issue either at the local or federal level. I said I would send an email summing up our talk. All in all is was a civil conversation.

I also spoke with a police Sgt who said they had spoken to the CEO. They said he admitted there was a money issue with the 401K and that he was making every effort to pay it back. The Sgt. seemed to be somewhat tolerant of the delay in getting the CEO to cough up the money due to the financial issues the company is having. I'm not sure that’s exactly appropriate. The Sgt suggested other employees file reports as well so that it can be added to the investigation.

One open question I have is whether the jurisdiction for this is the local police or the EBSA – Employee Benefits Security Administration? Some googling around seems to suggest that taking money from a 401k is a federal crime and would be investigated by the EBSA. In any case I am reporting it to them too. Will reach out to the local DA and see I they help with any info.

Thanks for all the great advice.


Okay, you started the ball rolling. The cops spoke to the crook, he gave them a story, and they let him go. Next step is to write out a letter and present it to the police captain personally, stating that you were stolen from and the cops did nothing. Explain that this is a financially sophisticated individual who likely has stashed the stolen money, and you consider him a flight risk. Request that he be jailed immediately.

I'm not kidding about the flight risk. He's embezzled from one company and is setting up a second company. My guess is he's lining up investors for the second company and will then abscond with that money as well.

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Whoa - hold on there guys. This place sounds like it has been spiraling into ruin for a while. It isn't like the guy actually stole the money. The money was never really there.

A simple example...say they've got 20 employees making a thousand bucks a week. The gross payroll is $20,000 a week. But the NET amount of the checks to employees is only, say, around $700 per person, or $14,000. The rest goes for all the payroll deductions - federal and state tax withholding, insurance premiums, SS, 401k, etc.

So Friday rolls around and the boss says, "can we make payroll?" The bookkeeper says, "just barely; we've got 15 grand in the bank." So the boss says to go ahead and cut the checks.

The way you guys are describing the scenario, you make it sound like the boss put the other $6,000 in his pocket and walked out.

Now, to be accurate, the company does have the legal and fiduciary responsibility to pay the other $6,000 to the IRS and the state and SSA and the insurance company and the 401k administrator, but if the place was a sinking ship, you are probably going to try to make payroll as long as you can and hope you can turn a corner.

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dcwilbur said:   Whoa - hold on there guys. This place sounds like it has been spiraling into ruin for a while. It isn't like the guy actually stole the money. The money was never really there.

A simple example...say they've got 20 employees making a thousand bucks a week. The gross payroll is $20,000 a week. But the NET amount of the checks to employees is only, say, around $700 per person, or $14,000. The rest goes for all the payroll deductions - federal and state tax withholding, insurance premiums, SS, 401k, etc.

So Friday rolls around and the boss says, "can we make payroll?" The bookkeeper says, "just barely; we've got 15 grand in the bank." So the boss says to go ahead and cut the checks.

The way you guys are describing the scenario, you make it sound like the boss put the other $6,000 in his pocket and walked out.

Now, to be accurate, the company does have the legal and fiduciary responsibility to pay the other $6,000 to the IRS and the state and SSA and the insurance company and the 401k administrator, but if the place was a sinking ship, you are probably going to try to make payroll as long as you can and hope you can turn a corner.
Funny, you did the exact same thing that you chastised everyone for doing.... you assumed what happened.

No one here knows what happened. The money might have been stolen (embezzled) or the money might have never been there in the first place to meet the obligations. Neither you nor the people making the theft assertion know the truth.

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Op if you tell the copS or DA sl there are other agencies who handle things like this , they will be quick to pass it off. The local police are the ones who can directly affect this guys life and ability to re start as a new company . Keep hammering . All he is giving is delay excuses . Make him fearful of arrest and conviction which wouldn't be good for his credibility at a new business

You are owed more than just the 401k money anyway.

If he wants you to drop this, then he makes you whole out of his own pocket NOW.

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mmarreco said:   Every company that provides a 401k plan needs to carry an ERISA Bond. This is a bond that covers fraud by the fiduciaries which appears to be the case here.

Call your plan administrator, they should have information about your company's ERISA bond and they can help you file a claim (or put you in touch with the insurance company that issued the bond).

Has the OP done this yet? This seems like the easiest and fastest way to get the money. If your CEO is not the most above board guy, I wouldn't be surprised if your company did not have this insurance.

Skipping 123 Messages...
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Let this be a lesson to all the embezzlers and crooks out there: Sure, you might get away with millions of tax-free dollars to spend on H&B for the rest of your life, but if we catch you, you'll have to pay back all the money you stole...

...and not much else.

And we wonder how Bernie Madoff happened...

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