Executives of Hostess, the maker of “Twinkies,” have admitted that they did not put the money paid into workers’ pension plans into a separate account. Rather, they basically stole the money and used it for operating expenses. In turn, the money inevitably supported the executives’ own bonuses. (This practice is not illegal in the US, just tacky.) Hostess is now bankrupt, so that the pensions may be lost. (One of the reasons Social Security is necessary is that most workers never see their pensions because their companies go under before there is ever a pay-out; but executives always seem to walk away with a pile of money anyway). The US taxpayer could pick up some of the cost of paying the pensions.
RT reports on the theft of the pensions by executives for their bonuses:
Couldn’t the directors and officers be sued individually for illegal acts (for failing to act properly as fiduciaries)? And how would they defend themselves — with a Twinkies defense?
I’m in complete agreement with the thrust of this story, that the behavior of those who ran the company into the ground was unconscionable. I wish more people could grasp the difference between “equity” capitalists and “venture” capitalists but unfortunately the distinction is hard for non-financial types to digest.
But it is misleading to suggest, as Hartmann does here, that tax money is being misappropriated. PBGC is, in fact, overseen by government, but it is not funded by taxes. Like FDIC, PBGC is an insurance scheme funded by the entities being insured. In this case funding is by all those defined benefits pension plans themselves. Like most insurance funds, there is a fairly lengthy time span between when premiums are collected and payouts are required (which is VERY long in the case of retirement plans, plus payouts are incremental, spread over several years) so the risk is spread wide).
Unrelated to this odious practice is one I heard about a few years ago, funding executive compensation packages by the proceeds of life insurance policies on employees about which the insured individuals know nothing. The company pays the premiums and becomes the beneficiary and eventually all will be paid since everybody eventually dies.
link to online.wsj.com
I don’t know how widespread this practice was or if it still possible. But it seems for every regulation there is a way around it for those with enough influence.
Where’s the outrage? Oh yeah, the TeaBEGGARs are convinced that only those who Galt their way to the top are deserving of all that money. “Pensions” are for lazy mopes who don’t want to “work for their money” like guys who get to appoint and oversee the “compensation committees” who approve the theft of all that pension money, money actually earned by actual work that produces something of value. (Not that Twinkies and Ho-Hos and Dum-Dums have a huge value, of course,but they produce the income that the ratty basties at the pinnacle of the pyramid skim off for their pleasure.)
So heck, yeah! STEAL our contractually-defined pensions! STEAL the enforced savings for our old age called Social Security! “There you go again!” It’s all good — some day I might be the one doing the stealing, after all.
In the meantime, the bankstas are still on a roll:
link to nakedcapitalism.com
Pension plan recipients have broad remedies under the ERISA Act if pension plan administrators mismanage a program as these administrators stand in a fiduciary relationship with the employees whose funding they administer.
As in the Enron scandal, the financial onus may eventually fall on corporate auditors who may have been able to detect poor funding and management practices. The Arthur Andersen CPA firm collapse resulted from the Enron fiasco.
Yeah, I suspect you and I will pay for this in the end.
And yet everywhere in the media, the headlines scream “UNIONS CAUSE HOSTESS BANKRUPTCY!”
Headlines written by members of the same elite class as these thieves, going to the same golf clubs, putting their kids in the same private schools. Because it is the same caste of men who run the media, the think-tanks, and the US Chamber of Commerce.
The Pension Benefits Guarantee Corp backs private sector pensions. Social Security is a different thing.
For what it’s worth,
link to en.wikipedia.org
Sort of a hole-y safety net. Gee, where do you suppose the other billions of dollars (and since PBGC payouts to pensioners under most “failed” [read: raped] plans are usually less than the contracted amount the bled-out company agreed to pay, the “deficit” is a lot more than $23 billion as far as impact on the employee goes) got off too?