Corporate crooks

[DanS]

The current and former managers of United and its employee unions should be brought up on felony fraud and theft charges for this, as far as I'm concerned.

Government takes over United pension
Says airline funded only 30% of plan; will give $2.1B to 36,000 active and retired ground workers.
March 11, 2005: 12:50 PM EST

WASHINGTON, March 11 (Reuters) - The U.S. agency that backs corporate pensions said Friday it was taking over United Airlines' pension plan for ground employees, saying the plan operated by the bankrupt airline was only 30 percent funded.

The Pension Benefit Guaranty Corp. said it would guarantee payment of an estimated $2.1 billion in benefits out of the plan's $2.9 billion shortfall. The plan has more than 36,000 active and retired employees, the agency said.

The machinists union representing the ground workers criticized the move, saying many employees would lose some benefits.

"United's deliberate course of action and absence of concern for its employees is directly responsible for the pension crisis we are facing today," a union spokesman said in a statement.

UAL Corp. is the parent company of United Airlines.

[Sava]

death penalty

[Kuciwalker]

Originally posted by Sava
death penalty

[mrmitchell]

Instead of having an agency that backs corporate pensions there should be a law that says shortfalls have to be taken out of salaries starting from the CEO and then going down.

Voila! No more corporate crooks.

[chequita guevara]

Without seeing more of the evidence, I have to wonder why DanS is blaiming the union. The company has been ripping off the unions since the unions bought into the company. The current management of United successfully drove the company into bankruptcy, by spinning the profitable parts of the company off, and now, having taken the unions' money (for which the union got a 25% stake in United Airlines, but not in the company which owns United Airlines), they plan on breaking the unions.

Heck, the judge overseeing the bankruptcy forced a retroactive pay cut on the employees. The people I know who work at United already make crap for wages, and taking a month of pay back from them was plain evil.

[Urban Ranger]

Originally posted by mrmitchell
Instead of having an agency that backs corporate pensions there should be a law that says shortfalls have to be taken out of salaries starting from the CEO and then going down.

He wise man

[Agathon]

Originally posted by mrmitchell
Instead of having an agency that backs corporate pensions there should be a law that says shortfalls have to be taken out of salaries starting from the CEO and then going down.

Communist!

[SnowFire]

So, if this was just straight-up underfunding rather than some complex Enron-style "we invested in our own stock which then crashed" deal... how come this didn't show up in audits a long time ago? Did they cook the books that well?

[Imran Siddiqui]

Maybe no one complained about it. The agency that deals with issues of underfunding plans (Department of Labor) doesn't go over every plan to see if they are fully funded. They have to rely on complaints from the workers who are having trouble getting their pensions, TPA's complaing about underfunding or what not. There just isn't the resources to go through every single plan to see if it is fully funded or not. That would expand the Employee Benefits Security Administration of the DOL to 10 times the current size it is now (and I'm really not exaggerating).

So, if the union knew about it (and they may not have if there was some funny business), they should have gone to the courts right away, because the company was violating ERISA.

[notyoueither]

Canadian government has a novel approach to employee deductions and such. The directors of the corporation are personally liable for them.

I wonder if this would happen if the directors were personally liable for such schenanigans.

[JohnT]

The current management of United successfully drove the company into bankruptcy, by spinning the profitable parts of the company off, and now, having taken the unions' money (for which the union got a 25% stake in United Airlines, but not in the company which owns United Airlines), they plan on breaking the unions.

Actually, the employees received 55% of United Airlines stock in exchange for pay freezes, benefit reductions, and other salary concessions, though you are correct in pointing out that they didn't exchange the concessions for stock in the parent company, UAL Inc. I am unaware if the union itself owns any stock, however they are granted 2 seats on the board (salaried and management employees also get to elect a solitary director themselves.)

The fact is, United has been in trouble ever since deregulation as they (and others) have struggled to provide quality services at cut-throat prices. I have read in a number of sources that if you add up the yearly profit-losses of the US airline industry since December 1903, it is well into the red. Which doesn't surprise me - it's a tough business.

[DanS]

Here's how the racket works. Both the management and the employees know that the taxpayer will pick up the tab for the pensions (somewhat reduced). From there, it's just a matter for both management and workers to maximize their take from the taxpayer.

I really wish United ill fortune now. Hopefully, the company will be liquidated and all of the management and employees will get thrown into the soup line.

[Imran Siddiqui]

Here's how the racket works. Both the employers and the employees know that the taxpayer will pick up the tab for the pensions (somewhat reduced). From there, it's just a matter for both management and workers to maximize their take from the taxpayer.

Um... yeah, and then the fiduciary is subject to jail time... so I'm sure they don't plan the 'racket' to work that way.

[DanS]

Funding a pension at 30% shows a blatant disregard for fiduciary duties. I think all of the fiduciaries should be prosecuted. If they aren't, then the "subject to jail time" clause isn't worth the paper it's written on.

[Imran Siddiqui]

Yeah, and usually isn't part of a 'racket' when it happens. Jail time usually doesn't flow from negligent behavior or general ignorance. Its for egregious violations, like taking participant money to buy your own yacht or setting up a 'racket' with the union.