September 3, 2007

Senator Daniel Akaka

Prince Kuhio Federal Building
300 Ala Moana Blvd., Rm. 3-106
Box 50144
Honolulu, HI 96850
Tel: (808) 522-8970
Fax: (808) 545-4683

Dear Honorable Senator Akaka

I look for your support to seek a ERISA 4047 reinstatement of the United Airlines Pensions from the PBGC. This request is based on the disclosure by United Airlines executives on or about July 20, 2007 that they have sought and received a valuation for an asset, known as the “Mileage Plus Program” that will benefit the Corporation by at least $7.5B. These executives have also disclosed that their intent is to “spin off” this asset. This means they have concluded it is not needed for sustainability of the corporation. They further have disclosed this “spin off” should increase the stock price significantly.

In a 1987 case PBGC v LTV the Supreme Court held in 1990, that the PBGC has the authority and purpose to seek the reinstatement of terminated pensions in almost any situation, especially where the financial condition of the corporation has changed favorably. Also, in this instant case the procedures and actions taken that lead up to the termination may have been questionable regarding the underlying corporate fitness. This action translates into an abuse of the PBGC insurance program another basis for the 1990 Supreme Court ruling. And finally it appears that government officials designed to protect the employees in termination situations may have had conflicts of interest that swayed the PBGC action unfavorably further supporting the requested reinstatement of these pensions under ERISA, 4047.

BACKGROUND

As you are aware United Airlines entered into bankruptcy in December 2002 citing their inability to secure an ATSB loan guarantee.

United Airlines was employee owned by way of deferred compensation over a six year period, the ESOP.

At the time that United entered bankruptcy the company was structured as an ESOP with 53% of the outstanding shares of the firm held by the employee groups. These shares were purchased by way of a deferred compensation agreement over a six year funding period. During this period since the ESOP was set up as a Retirement Fund vehicle, contributions to a 401K account were reduced since IRS laws count the paper value of the ESOP shares to compute the allowable contribution to a retirement account.

As United executives began the bankruptcy processing they moved to divest the ESOP structure and as United Airlines ( UAL) shares were around $9.00 per share they sought and received bankruptcy court approval to prevent the ESOP trustees from selling shares because the change in ownership would have created a tax consequence for the corporation.

The ESOP shares held by the employees and structured to be a retirement vehicle diminished to less than a $1.00 before becoming worthless with the bankruptcy exit.

United Executive failed to disclose the true value of assets including “Mileage Plus” at $7.5B .

The executives at United filed their Petition with the bankruptcy court listing all of the assets and liabilities of the corporation. The bankruptcy court approved the petition that these executives signed validating the list of assets to be true and correct. In fact one asset that UAL executives did not disclose as to its known inherent value was the Loyalty Program known as “The Mileage Plus” program. UAL executives were aware that since 2001 Air Canada had been preparing both their Loyalty Program and their maintenance base for sale to generate cash. In fact, UAL executives were aware that Air Canada had announced it had sold just 30% of its Loyalty Program know as “Aeroplan” for $245M USD to an outside firm in 2003. It was known to the executives as a result of media reports about the “Aeroplan” sale that a similar sale of the “Mileage Plus” program by UAL could generate between $6B-10B dollars.

During the Bankruptcy proceeding United Airlines executives sought Bankruptcy court approval to terminate the remaining Defined Benefit Pensions for all employee groups then valued at $6B. These executives were keenly aware this undisclosed asset “The Mileage Plus” program could have been used to fully fund these pensions.

United executives breach corporate governance laws by providing with purpose a version of a portion of an ATSB loan to the ATSB, yet redact certain portions when presented to the UAL Board Of Directors. These actions exhibit a pattern of intent to not fully disclose certain facts.

The Unions accused United executives of setting the termination of pensions ( Section 1114 relief) as a business plan strategy even before July 2003. The court ordered an examiner to determine if these executives did plan these pension terminations prior to a full review of their value. See Report of Examiner Ross O. Silverman attached hereto. In this report at Page 33, Paragraph 9. The Transmittal To The Officers And Directors Of United Of A Redacted Version Of The ATSB Narrative. This action provides a pattern of behavior that would be consistent with the withholding of an assets true underlying value in the Bankruptcy court. In this report the author describes a pattern of covert handling of documents to formulate a plan that represents what the corporation wants the Bankruptcy court and the PBGC and the ATSB to know not what the true state of the corporation was at the time. The report cites examples of executives discussing “filling voids” in revenue projections. In addition the report details the use of the telephone and fax and email in their efforts to produce two versions of this Federal Loan package, the use of telephones, wire, and email could rise to the level of a federal RICO violation. In this report even United’s counsel details conversations between executives regarding that these actions rise to the level of a violation of corporate governance laws.

The ATSB relied upon the loan documents prepared by United executives to be considered for their Federal Loan Guarantee program. These executives as described in the examiners report prepared and distributed at least two different versions of the business plan. The significant difference was apparently in the use of termination of pensions to show viability. While the ATSB was unaware that the executives failed to disclose to their Board of Directors that the Loan application they submitted to the ATSB was materially different from the one presented to the UAL Board of Directors. The ATSB ultimately denied the request by UAL for its loan guarantee stating that capital resources were available to UAL in the private markets.

The PBGC would rely upon these stated asset values and the firms fitness to determine if its obligation to fund the Defined Benefit Pensions should be terminated. In this case the facts indicate United Executives devised different schemes to fit the audience. Since the ATSB believed the United executives did not make a valid case that their financial condition as presented in the Loan documents, rose to the level for a Federal loan guarantee even with the termination of the pensions included , why did these executives redact the plan to terminate pensions from their own Board of Directors. This scheme is detailed in this Examiners Report and is a part of the official record in the Bankruptcy court.

The PBGC allows for such termination when the divesting firm has proven that without such an action the firm could not continue to operate. United Airlines executives filed such a motion to terminate the Defined Benefit Pensions of all employee groups on or about 2003. The PBGC the Federal agency that was set up in the 1974 legislation of ERISA has specific guidelines to follow: see footnote below, an excerpt from a report to a Government oversight committee regarding the PBGC 2007.

[1]The PBGC cited their legislative requirement Background: Congress passed ERISA to protect the rights and interests of Participants and beneficiaries of private sector employee benefit plans. Before the enactment of ERISA, few rules governed the funding of defined benefit pension plans,[Footnote 5] and participants had no guarantee that they would receive promised benefits. Title IV of ERISA created PBGC to insure plan participants' benefits and to encourage the continuation and maintenance of private sector defined benefit pension plans by providing timely and uninterrupted payment of pension benefits.[Footnote 6] Through its two insurance programs, PBGC covers certain private sector defined benefit plans.[Footnote 7] PBGC is funded through insurance premiums from employers that sponsor insured pension plans as well as investment income and assets from terminated pension plans. ERISA established a governance structure consisting of a board of directors, with the Secretary of Labor as the Chairman of the Board. ERISA provided the Secretary of Labor with responsibility for administering PBGC's operations, personnel, and budget. The Secretary delegated the responsibility for administering PBGC to an Executive Director through a series of chairman's orders describing the Executive Director's responsibilities. For example, one order issued in 1984 authorized the Executive Director to make final decisions addressing legal matters on behalf of the corporation. In 2006, PPA replaced the Chairman of the Board as PBGC's administrator with a Senate-confirmed director. The PPA established the director position at the same level of the executive schedule as two of the PBGC board representatives-- Under Secretaries of Commerce and Treasury as well as the heads of other federal government corporations, such as the Federal Deposit Insurance Corporation (FDIC) and the Export-Import Bank of the United States. In addition, the corporation is aided by a seven-member Advisory Committee appointed by the President to represent the interests of labor, employers, and the general public.[Footnote 8] This committee has an advisory role but has no statutory authority to set

PBGC policy or conduct formal oversight

These aforementioned guidelines were intended to insure that a firm requesting such termination does so as a means to shed the cost of these Defined Benefit pensions as one of the only means remaining to the firm or it would have to cease operations. Since UAL executives did not disclose the significant value of the asset known as “the Mileage Plus” program the true value of the firm was not easily determined by the PBGC.

The PBGC director states the UAL pension termination if allowed would be the largest and most costly such action to pensions in U. S. History. UAL executives did not want to take the time to have the PBGC conduct a full analysis of the underlying Pension Values.

The United Airlines executives did not want the PBGC to take the time to make a full analysis of the Defined Benefit Pensions. The Director of the PBGC made public comments that the size of the UAL Pensions if they were allowed to be terminated would be the largest and most costly for the government in U.S. History. Further, it would take some time to complete a thorough review of these pensions. On or about January 11, 2005 United Airlines executives and Lawyers met with PBGC authorities to persuade the PBGC to withdraw its opposition to the motion to allow termination of the Defined Benefit pensions. A series of eleven (11) meetings were held in Washington and New York concluding with an April 13, 2005 meeting and agreement. . This meeting schedule and who attended was determined byway of a FOIA letter request of the PBGC dated April 23, 2005 FOIA 2005-0764

PBGC agrees to withdraw motion against an expedited termination and will receive $1.5B in convertible Notes from UAUA.

This agreement dated April 22, 2005 directed the PBGC to withdraw its motion to prevent the termination of the Pensions in the Bankruptcy court, and United Airlines promised to provide the PBGC with convertible Notes in the amount of $1.5B. The PBGC did take the action agreed to withdraw its motion in opposition to the UAL request to allow termination of these pensions, at a May 9, 2005 hearing in the Bankruptcy court.

PBGC Director Belt concludes allowing termination before a lengthy complete review of the UAL Pensions will actually save the PBGC additional liability .

This agreement does not meet the underlying legislative standard and purpose of the PBGC. The PBGC Director, Mr. Belt had made public statements that some of the pensions under review might not be under funded. The PBGC Director did cite one of the reasons to take this expedited action to allow termination as requested by UAL executives as it might save the PBGC Corporation from addition liability. The agreement creates an age discrimination impact on the workers that are over forty years old that are part of these Defined Benefit pensions. The PBGC director took no action to prevent such a federal violation for these employees over 40 years of age. There is no record that the PBGC director sought a complete review or analysis of the true state of these underlying Defined Benefit pension funds prior to agreeing to termination..

Oversight Advisory Committee takes no action on behalf of the employees

There is an overseeing committee as outlined in ERISA that has several specific responsibilities as determined by the PBGC. One of the most important was the role as trustee of terminated plans. In this instance this Advisory Committee which is made up of members appointed by the President to act in various oversight capacities took no action to question the actions of the PBGC Director. The most controversial action was his insistence to forgo the time consuming action to fully determine the underlying value of each of the Defined Benefit pensions that were part of the United Airlines pension plans. Since the director had already made public statements that this termination was going to be the largest government pension termination in U.S. history how could this Advisory Committee allow such an unprofessional action.

The record shows the President announced by way of a press release dated May 5, 2005 that three new members of this Advisory Committee were appointed. The member assigned to represent employees in matters with the PBGC had a unexplainable conflict of interest . Robert Gordon a Texaco/.Chevron executive had worked for Glen Tilton while Tilton was Vice Chairman at Texaco/Chevron . Tilton was now CEO of United Airlines.

A copy of the press release narrative follows. The press release provides a shocking fact that at least one member being appointed had a conflict of interest. This conflict may have led to a favorable oversight for the PBGC actions with United Airlines against the employees. This was not the legislative intent for actions by the PBGC or its internal oversight agency, the Advisory Committee.

Robert Gordon, new appointee assigned to represent the employees in matters before the PBGC worked under the Glen Tilton at Texaco/Chevron during Tiltons tenure as Vice Chairman. Further, these appointees took their positions on this committee just four (4) days before the May 9, 2005 hearing regarding the PBGC new motion to support the United Airline immediate termination request in the Bankruptcy court.

A copy of the press release narrative is included below: Note emphasis added

FOR IMMEDIATE RELEASE

May 05, 2005

PBGC Public Affairs, 202-326-4343

President Names Chair, Three Members to PBGC Advisory Committee

President Bush has designated James E. Nevels of Swarthmore, Pa., as chair of the Advisory Committee of the Pension Benefit Guaranty Corporation (PBGC). The president also has appointed A. Norman Crowder of Naples, Fla., Robert Gordan of San Ramon, Calif., and Leopoldo E. Guzman of Coral Gables, Fla., to serve as members of the committee.

“The distinguished leaders selected by the President bring a wealth of knowledge and experience to the Advisory Committee,” said Executive Director Bradley Belt. “I am confident that the PBGC will benefit from their guidance, and I look forward to working with the new members and with Mr. Nevels in his role as chair.”

Mr. Nevels is chairman of the board of The Swarthmore Group, an independent investment advisory firm. He is also chairman of the Philadelphia School Reform Commission, which administers the seventh-largest school district in the United States. Mr. Nevels earned a bachelor’s degree in philosophy and political science from Bucknell University, a J.D. from the University of Pennsylvania Law School and a master’s in business administration from the Wharton School of Finance. He was appointed to the PBGC Advisory Committee in 2004 to represent the interests of the general public and will serve as chair until 2007.

Mr. Crowder is an independent consulting actuary with more than 40 years’ experience in pension and insurance practice. He has served as chairman and CEO of the Alexander Consulting Group, managing principal of the Tillinghast firm and director of corporate development of Towers Perrin. Mr. Crowder holds a bachelor’s degree in economics and mathematics from Middlebury College and master’s degree in mathematics from the University of Michigan. He is a fellow of the Society of Actuaries. He will represent the interests of employees on the PBGC Advisory Committee in a term to expire in 2008.

Mr. Gordan is assistant treasurer of ChevronTexaco Corp., where his responsibilities include the company’s activities with financial institutions and credit rating agencies. He holds a bachelor’s degree in finance from Fordham University and a master’s in business administration from Rutgers University. On the PBGC Advisory Committee, Mr. Gordan will represent the interests of employees in a term that expires in 2008.

Mr. Guzman is president and CEO of Guzman & Company, an investment banking and institutional brokerage firm that he founded in 1987. He holds a bachelor’s of science degree in operations research from Columbia University and a master’s in business administration from Stanford University. Mr. Guzman will represent the interests of the general public on the PBGC Advisory Committee in a term that ends in 2008.

The PBGC is a federal corporation created under the Employee Retirement Income Security Act (ERISA) of 1974. It currently guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in over 31,000 private-sector defined benefit pension plans. The agency receives no funds from general tax revenues. Operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by investment returns.

The PBGC Advisory Committee carries out several specific responsibilities outlined by ERISA, including advising on PBGC investment policies and procedures, the trusteeship of terminated plans, and other matters as determined by the PBGC.

— ### —

PBGC No. 05-39

United Airlines exits bankruptcy in February 2006 PBGC receives $1.5B in convertible notes, and UAL executives receive $100M in stock awards in the new issued UAUA.

The executives at United Airlines have as outlined here exhibited a pattern of behavior in dealing with the government agencies, like the PBGC, the ATSB and the Bankruptcy court that includes withholding of information.

United Executives release a plan to spin off the Mileage Plus program will bring in between $7.5B and $22B dollars making UAL stock worth up to $80.00 per share.

In a most recent incident to prove this pattern it has been reported that UA executives on July 15, 2007 sought and received an appraisal of the Loyalty program known as, “The Mileage Plus” Program “from an investment bank. It is reported the appraisal ranged between $7.5 and $22B dollars. As mentioned in this summary, these executives did not disclose this value in Bankruptcy court. These executives used every means available to them to terminate the pensions of the employees at United Airlines and to do so created an environment for them to withhold information, and attempt to influence government officials and those that are assigned to oversee or protect these actions against workers.

Then even as the PBGC, the government agency charged with maintaining these Defined Pension plans was offered a deal to not complete their value review of the state of the pensions , The President appoints a person that worked under the current CEO at United Airlines (Glen Tilton) while Tilton was Vice Chairman at Texaco/Chevron to a post that includes the duties to represent the interests of the employee that are part of a PBGC Pension termination action. This was the largest and most costly pension termination in US History. How could Robert Gordon be selected as the best person to represent employees impacted by a pension termination?

I ask that you seek a PBGC ERISA 4047 action to reinstate these terminated pensions. A review of the PBGC acitons, and question the integrity of the appointment by President Bush of Robert Gordon to the Advisory Committee. .

It is appropriate to seek some answers from the PBGC, President Bush, and direct the PBGC to begin an ERISA 4047 action to reinstate these terminated pensions at United Airlines. Like in the case PBGC v LTV the ERISA 4047 reinstatement action was allowed by a Supreme Court Ruling citing among other things that the business condition of LTV Corp had changed allowing for the reinstatement of the pensions without impacting the underlying business.

I was motivated to draft this letter since a key issue in election politics in America is the abuse of government officials and government waste. In this case it is clear UA executives failed to disclose to the PBGC and the Bankruptcy court the very valuable asset now determined to be worth at least $7.5B dollars. If these executive had waited three or four years to bring this asset to the auction block they could have escaped the cloud that they withheld this underlying value even from the Bankruptcy court. But since it has been just over 16 months no time has passed where they could argue this asset has grown to this value since bankruptcy exit.

I come to you to assist in seeking a complete review of these actions by the PBGC director, the President in nominating a person with a clear conflict of interest in this costly government pension termination. And finally I seek to have you direct the PBGC to consider proceeding with an ERISA 4047 action to reinstate the terminated Pensions of these employees that did not get a fair and equitable handing by their government agency or the President in his appointments.

This ERISA 4047 action should be undertaken immediately before the executives at United Airlines are permitted to spin off this asset and reap the rewards with an increased stock price. This asset alone could make these pensions whole without any impact on the underlying United Airlines operations. The fact that these executives have made these spin off plans public provides the facts to conclude their business conditions have changed allowing this ERISA 4047 action to be undertaken. Finally, their plans to spin off this valuable asset also prove they have weighted the business and financial impact.

I look forward to your response in this very critical matter of government waste, violation of corporate governance and the Presidents appointment of a person with a clear conflict of interest in the termination of pensions of these older workers.

Sincerely,

Committee for the Restoration of Pensions at United Airlines 2007

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United's Faustian Bargain

http://www.fool.com/investing/general/2007/11/02/uniteds-faustian-bargain.aspx

Rich Duprey
November 2, 2007

Literature's Dr. Faustus is a scholar who has learned all there is to know and makes a pact with Mephistopheles, the devil, trading his soul for power and material gains. He's likened to Icarus, who flies so close to the sun his manmade wings melt, and he falls fatally to Earth.

That seems like an apt metaphor for the deal United Airlines' parent UAL (Nasdaq: UAUA) made with the government's Pension Benefit Guaranty Corp. (PBGC) in defaulting on its employee pensions.

Apparently, I was too exuberant in suggesting the government give back to United the pension obligation it foisted on the PBGC. As part of its agreement with the airline, the PBGC imposed an extraordinary waiver of its powers and agreed not to seek to restore it to United -- ever.

It's a curious move by the pension agency. While only once before has it returned a pension plan to a company that defaulted on its pension obligations, I'm sure today's situation might be the only time a company has been sitting on a host of valuable assets it now wants to spin off and reap billions of dollars in profits from.

An embarrassment of riches

UAL has been floating the idea of selling its Mileage Plus loyalty program, which one Bear Stearns (NYSE: BSC) analyst has suggested could be worth $7 billion if spun off. It also wants to shed its profitable United Services division -- the maintenance, repair, and overhaul business estimated to be worth as much as $600 million. In total, United might be able to fetch some $16 billion from the noncore pieces it puts up for sale. Considering the PBGC assumed more than $6 billion worth of pension obligations from United, it would be reasonable to ask why the airline shouldn't be responsible for the obligations it shed.

Employees were the ones who lost their souls after having worked for decades for the airline to see their benefits slashed. Pilots, for example, who are required by law to retire at age 60, found out that not only would their benefits be cut nearly in half because the maximum the PBGC pays is about $47,000 for someone who retires at 65 -- they were penalized again because the PBGC discounts benefits further for those who retire before 65! Talk about being caught between the flames and the fire!

Contrast that with the sweet deal chairman, president, and CEO Glenn Tilton carved out for himself.

A deal worthy of Mephistopheles

If not for its extraordinary waiver guarantee, the PBGC might have returned the pension obligations to United as it did with LTV in 1990, and restored to United's employees the benefits they had worked and negotiated for, and had been expecting. What's not clear is why the PBGC agreed to such a waiver.

Was it the money? The PBGC was given a $1.5 billion stake in United when the airline reminted its previously worthless shares, equivalent to 23.4% of all outstanding shares and making it the largest shareholder at the time. The pension agency received 11.1 million shares of common stock and 5 million shares of convertible preferred shares. It's not atypical for the PBGC to get shares in a company whose pensions it takes on, as it allows the federal corporation to recoup some of its costs.

A higher calling

In Goethe's Faustus, divine intervention at the last moment prevents Mephistopheles from seizing the alchemist's soul. Unless it's found that there was some skullduggery involved in the negotiations between United and the PBGC, it seems it will take divine intervention to make United responsible for its pension obligations.