Corporate crooks

[Dinner]

Originally posted by DanS
To get to 30% funding, you have to underfund the account for several years. And the difference is given out in salaries to the executives and workers. Both groups knew what was going on, and I'll continue to believe them both to be crooks of the highest order.

The government does similiar crap. Here in San Diego our curropt politicians have created a very similiar situation where the politicians try to buy the support of the government workers union by outragiously promising the most lavish pensions of any government workers in the country then not bothering to put any money into the pension fund. Last I heard a federal judge issued a court order telling the city they legaly had to start fully funding their pension system.

There was also the issue of several local Republicans using funny accounting with the city's books so that several of them are likely to go to jail. Things are so bad and voters so disillusioned that an unknown independent write in candidate came with in 200 votes of winning the election last November. People seem to loath both the local Republican and Democratic parties.

[Az]

The only thing I hate more than unions that sell out is employers that buy them.

But I don't see obvious evidence of the union being at fault here.

[Odin]

Originally posted by Oerdin


The government does similiar crap. Here in San Diego our curropt politicians have created a very similiar situation where the politicians try to buy the support of the government workers union by outragiously promising the most lavish pensions of any government workers in the country then not bothering to put any money into the pension fund. Last I heard a federal judge issued a court order telling the city they legaly had to start fully funding their pension system.

There was also the issue of several local Republicans using funny accounting with the city's books so that several of them are likely to go to jail. Things are so bad and voters so disillusioned that an unknown independent write in candidate came with in 200 votes of winning the election last November. People seem to loath both the local Republican and Democratic parties.

[Imran Siddiqui]

Originally posted by DanS
The International Association of Machinests and the Air Line Pilots Association had board seats, for chrissakes!

And? You act like that means something. The board isn't the one that puts the money in the plan. They usually have no clue about what happens with the pension plan. Ask the Plan Administrator. He (or she) is probably the ONLY one that really knew what was going on.

Also it doesn't "take years" to underfund the plan to where it is 30% funded (it can easily occur within a year). And 30% funding isn't even an utter travesty as you are asserting. Chances are that there are some fines assesed and the parties in charge are told they can never be fiduciaries again.... that is granted if anyone sues. The DoL can sue, but it depends on how cooperative United is being. And private suits? HAH! ERISA doesn't have punitive damages, which means no lawyer will give a **** about the case.

So, in essense, what I'm saying is that this is no big news. It isn't the absurdly rare thing you are insinuating it is. And I bet that hardly anyone on the board had the slightest clue. Hell, most Presidents of Corporations have no idea what goes on in their plans (you always have to speak to the Plan Administrator to get anything done when faced with an ERISA violation... if they are not around, it gets frustrating as Hell because no one else has any clue), why should the board?

[DanS]

They usually have no clue about what happens with the pension plan. Ask the Plan Administrator. He (or she) is probably the ONLY one that really knew what was going on.

Dude, this perception is so far removed from reality, it's laughable. Too much money is involved for it to fly under the radar screen.

[Imran Siddiqui]

Originally posted by DanS
Dude, this perception is so far removed from reality, it's laughable. Too much money is involved for it to fly under the radar screen.

Ah yes, should we trust the guy who actually works at the government agency that enforces the pension law or the guy who doesn't?

Really, outside of the Plan Administrator, most corporate officials have no clue about what happens with the plan. Money gets taken out of the paychecks and it may or may not be put in to where it needs to be. Corporate financing is too complex for most board members to comprehend. That is why they have armies of accountants (or accountant firms).

[DanS]

Really, outside of the Plan Administrator, most corporate officials have no clue about what happens with the plan. Money gets taken out of the paychecks and it may or may not be put in to where it needs to be. Corporate financing is too complex for most board members to comprehend.

This is a public company of some size. I can guarantee you that all board members have a working knowledge of financial accounting and that it takes no special skill to know whether your pension fund is 30% funded or fully-funded.

[Imran Siddiqui]

Originally posted by DanS
This is a public company of some size. I can guarantee you that all board members have a working knowledge of financial accounting.

And I can guarantee you that a vast majority have no clue of what is happening with the pension plan. Some of the cases that have come down on ERISA are really interesting in this regard. A few companies' board have been involved in obviously stealing from the plan, and they usually end up going to jail. Most of them, however, it is found out that the board is clueless and, at most, get fined (if that).

I do wonder if anyone is going to go to jail for this, but I doubt it. PBGC was involved in taking the plan over well before bankrupcy was declared (it didn't just happen). Frankly, it is one of the few smart things PBGC has done in a while. Aside from that though, by not waiting until bankrupcy, they could have United reimburse the plan somewhat and AFAIK, they did give the PBGC some money to help them pay out the plan assets. That cooperation probably means they saved themselves from anyone getting a massive judgment against them.

[Imran Siddiqui]

Here is an interesting article from a few years back:

Barron's - Many Pension
Plans Seriously Underfunded
By Russ Britt
CBS.MarketWatch.com
10-20-2

NEW YORK (CBS.MW) -- Nearly half the pension plans for 500 companies in the Standard & Poor's Index are underfunded, according to a report in Barron's.

A total of 240 companies in the index -- or two-thirds of the 360 S&P 500 companies that have pension plans -- had underfunded plans at the end of 2001, according to the story in Saturday's edition. That's the highest level of underfunded plans in 10 years.

The effect could be devastating on companies' bottom lines, as they may have to dip into the corporate coffers in order to meet their obligations to pensioners.

"We have over $300 billion of pension-fund deficits in 2002 for S&P 500 companies," said Trevor Harris, head of Morgan Stanley's valuation and accounting research group, according to the report. "That's $300 billion of cash these companies have to come up with over the next few years, and $300 billion that comes out of corporate cash flow."

David Zion, an accounting analyst at Credit Suisse First Boston, told Barron's the number of companies with underfunded plans could rise to 325 by the end of next year, given the current market environment.

He said such companies as AMR (AMR: news, chart, profile), the parent of American Airlines, and Goodyear Tire and Rubber (GT: news, chart, profile), face underfunded liabilities that exceed the companies' market capitalizations.

It appears Zion's predictions are coming true. Associated Press reported late Friday that AMR, which lost $924 million in the third quarter, could face a $1 billion charge to cover pension liability this year unless investment returns improve.

AMR's market capitalization now stands at roughly $700 million. The company's shares closed Friday at $4.30, up 5 cents, and added another 20 cents to $4.50 after hours.

A company's pension obligations depend largely on the number of retirees still in its system, plus external forces such as stock market performance.

Accounting rules allow companies to even out gains and deficits for pension plans over time. But in a protracted down market such the current one, some companies may have to go to the corporate cupboard to fund the plans.

Particularly hard hit are automakers, which have massive obligations to their workers. General Motors (GM: news, chart, profile) says its pension assets have dropped by 10 percent this year, and Ford (F: news, chart, profile) reports its return on assets is off by 15 percent. See related story.

The problem is surfacing elsewhere. Northrop Grumman's (NOC: news, chart, profile ) stock took a hit this week when the company reported, among other issues, uncertainty over what its pension obligations would be for 2003. Northrop said it was unable to offer guidance on 2003 net profits without a clear pension picture. See full story.

Northrop ended the week's trading sessions down 78 cents to $100.72, but ticked up 59 cents after hours Friday to $101.31.

-- Russ Britt is the Los Angeles Bureau Chief for CBS.MarketWatch.com.

© 1997-2002 MarketWatch.com, Inc. All rights reserved.

Of course the main reason for the underfunding is the crap performance of the stock market. If the market goes down, obviously the plan isn't going to have the money you put into it.

[DAVOUT]

The US Air Transport Industry is a strange case of a business fully protected from a foreign competition (national flights are forbidden to foreign companies) which is closing bankruptcy almost totally, in a way which is not, management wise, different from the steel industry.
I suppose that it will be difficult to accuse the yuan or the european subsidies.
Surprisingly, it seems that all the accounting show displayed after the Enron game has not really improved the natural behaviour of the american business men.

[Ted Striker]

DanS sticking it to corporate crooks.


Corporate crooks

Raiding pension funds

[Patroklos]

The US Air Transport Industry is a strange case of a business fully protected from a foreign competition (national flights are forbidden to foreign companies)

The key is that our airlines are at least psuedo buisnesses, as opposed to the air transport department of the government.

[el freako]

Originally posted by Patroklos

The key is that our airlines are at least psuedo buisnesses, as opposed to the air transport department of the government.

A most amusing show of ignorance there Patroklos

[Mr. Harley]

Some common misconceptions here.

First, when the federal government takes over a pension, it is very rare for the workers to get anything approaching what the would have received, and it can drop as low as 40%. So whenever that happens, the employees get ****ed. The Unions these days are almost never complicit in it.

Secondly, underfunding of pension plans is legal. I know Clinton signed off on one of the larger changes permitting that, as a result of Republican passed legislation. Additional changes, permitting even further underfunding, have occured since Bush Jr. became presdent, in this case completely out of the Republican party.

Many businesses prefer to underfund their pensions, that way they can show better results. Duh. If the regulators are not enforcing the rules due to executive branch policies/lack of funding, businesses will manipulate the rules and claim it was not fraud, but an understandable mistake, pay a fine, and leave with billions in extra profits. What is obscene to me is that the Pensioners end up being relatively far down on the creditor scale when the companies declare bankruptcy. Now that is obscene.

[Imran Siddiqui]

when the federal government takes over a pension, it is very rare for the workers to get anything approaching what the would have received

In this case it seems that most of the pensions will recieve something close to what they were going to. United seemed to work with the PBGC to help with that before the bankrupcy was finalized.