Barbara Hollingsworth: Porn-surfing SEC missed investigating United's bankruptcy

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WASHINGTON EXAMINER ARTICLE

Barbara Hollingsworth: Porn-surfing SEC missed investigating United's bankruptcy

By: Barbara Hollingsworth
Local Opinion Editor
May 4, 2010

Now we know why so many Securities and Exchange Commission lawyers and accountants did little or nothing to prevent Wall Street bankers from playing musical chairs with toxic assets, or stop Bernie Madoff and Allen Stanford from stealing billions from investors. They were too busy downloading porn on their government computers.

Which also explains why the SEC didn't bother to investigate serious allegations regarding the United Airlines bankruptcy and the largest corporate pension default in U.S. history.

When Chicago Chief Bankruptcy Judge Eugene Wedoff declared United bankrupt in 2006, the airline was allowed to dump all its pension liabilities on the federal Pension Benefit Guaranty Corporation. But retired pilots claim that the airline fraudulently listed its frequent-flier Mileage Plus asset -- worth an estimated $15 billion at the time -- as a liability in documents submitted to the court and the PBGC.

Immediately afterward, James Sprayregan, United's lead bankruptcy attorney, accepted a job at Goldman Sachs -- one of the airline's major creditors. The timing of Sprayregan's move should have at least piqued the interest of SEC regulators. It did not. They were otherwise engaged.

In an Oct. 18, 2007, letter to then-SEC chairman Christopher Cox, which was also sent to Sen. Barack Obama, D-Ill., and a host of other federal officials, former United 777 captain Dan Hanley (now the national spokesman for the Whistleblowing Airline Employees Association) charged that Goldman Sachs helped United management falsify its financial records so the airline could dump its pension liabilities on taxpayers in violation of the Sarbanes-Oxley Act.

On Feb. 14, 2008, Hanley called the Chicago office of the FBI to file an official complaint, including a list of evidence and key witnesses. A year later, none of the witnesses had been interviewed by either the FBI or the SEC, so Hanley asked Attorney General Eric Holder to look into the matter. On June 17, 2009, he received an unsigned letter from the DOJ inspector general's office claiming it did not have jurisdiction in the matter.

"United Airlines entered into an unprecedented secretive agreement with the PBGC, which is already near insolvency, in allowing this quasi-governmental agency to assume their massive pension liability in exchange for equity in United Airlines," Hanley charged in an April 28, 2010, letter to President Obama.

In a Nov. 3, 2009, letter to Hanley, SEC Inspector General David Kotz finally admitted that he "did not believe that sufficient action was taken by the Office of Investor Education and Advocacy." Under Sarbanes-Oxley, SEC officials have the power to seek a court order temporarily suspending United management during an investigation. So far, that hasn't happened, even though Hanley publicly accused United Chief Executive Officer Glenn Tilton of misrepresentation while testifying before the Senate Finance Committee.

In fact, United and Continental Airlines' senior management just announced a merger that will make the new airline the largest in the world -- and possibly provide multimillion-dollar bonuses to the same United executives named in Hanley's affidavit.

The Public Company Accounting Board, which was established under Sarbanes Oxley to oversee the auditors of public companies to protect investors, likewise failed to prevent the destruction of billions of dollars worth of employee-owned stock during United's bankruptcy. Nobody's asking why, even though a lot more than a merger is on the line.

When SEC employees finally take a work break from their porn surfing, they should earn their bloated salaries by determining whether Tilton and other United executives listed "Mileage Plus" on the right -- or wrong -- side of the ledger.

This is not rocket science. After three years, SEC's continued stonewalling is obscene.

Barbara F. Hollingsworth is the Examiner's local opinion editor.

More from Barbara Hollingsworth

* Sticky-fingers Jimbo Traficant wants his old congressional seat back
* Letters from Readers - May 4, 2010
* Porn-surfing SEC missed investigating United's bankruptcy
* Letters from Readers - May 3, 2010
* Letters from Readers - April 30, 2010

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