10/13/2007
Elaine L. Chao
Secretary of Labor
U.S. Department of Labor
Frances Perkins Building
200 Constitution Avenue, NW
Washington, DC 202
Dear Madam Secretary:
On May 10, 2005, United Airlines, received court permission to terminate its four employee pension plans, setting off the largest pension default in the three decades.
The ruling released United from $3.2 billion in pension obligations over the next five years. The government measured United's pension shortfall at close to $9.8 billion.
Approximately one month later, (June 23, 2005) Air Canada sold 12.5% of its frequent flier program (Aeroplan).for $250 million which implied a total market value of the whole plan at $2 billion. At current exchange rates, this equated to US $1.6 billion.
United listed it’s frequent flier program in their 2004 Annual Report on page 25/26 as an $840 million liability, even though at the time of the termination of the pension plans, the Mileage Plus membership was at about 45 million which compared to the Air Canada sale would make that negative asset really about a $15 billion plus asset. That would be one and a half times the amount needed to fund the terminated pension plans.
Now, two years later, United has miraculously found that the Mileage Plus Program is really an ASSET, not a liability and is planning to sell it for profit now that it has shed its pension obligations and the officers have collected huge bonuses for themselves out of bankruptcy, while thousands of retirees and employees have lost the values of their hard earned pensions.
Madam Secretary, as the Chairman of the Board of Directors of the PBGC, it is within your power to restore our pensions to us by moving the PBGC to invoke Section 4047 of the Employee Retirement Income Security Act of 1974 (ERISA) and hereby order United Airlines to uphold its pension obligations.
When the PBGC fought LTV in the Supreme Court, using Section 4047, Justice Harry Blackmun, who wrote the opinion for the LTV Court's 8--1 majority, found the Pension Benefit Guaranty Corporation's policy to be rational because it encourages employees to object strenuously to employer actions that are likely to result in pension plan terminations. Employee resistance, he wrote, can be an important check against plan terminations and may be encouraged. Justice Blackmun’s opinion stands on the side of the United Airlines Employees. United Airlines lied about their assets in bankruptcy and fraudulently terminated our pensions and we now demand they be restored. You cannot deny the precedent of a Supreme Court decision.
Restore our pensions, now.
Respectfully,
Dan Hanley
February 20, 2008
Ms. Deborah Stover-Springer - Acting Inspector General
Pension Benefit Guarantee Corporation
1200 K Street
Washington, D.C 20005
Subj: Whistleblowing United Pilots Association
Dear Ms. Stover-Springer,
I am writing you with regard to alleged illegalities surrounding the distress-termination of all employee pensions during the United Airlines bankruptcy. Because of the actions taken by the PBGC during this questionably legal process, information has been requested employing the Freedom of Information Act (FOIA) as evidence so that we may legally address our concerns in this matter. To date, some of the information requested has not yet been received. It is hoped that your good offices might respond to our petition for this valuable legal information.
As you know, the agreement reached between the PBGC and senior-level United Airlines management included a provision that stipulated an ERISA 4047 waiver clause, which provided for a PBGC equity stake in United Airlines, part of which comprised the total $5.2-billion that United paid to the near insolvent PBGC with an unprecedented guarantee that United Airlines would never seek pension restoration after bankruptcy regardless of future profitability of the airline.
As if this unparalled arrangement were not already bewildering enough, the agreement further stated that at some future time of United's choosing, these monies would be returned to United, while the bankrupt PBGC was still financially burdened with United's pensions. It is for these reasons (and others), that we hereby request that the PBGC provide answers to the following questions:
1) Request clarification and legal authority regarding the specific reasons for the ERISA 4047 waiver in light of the weak financial health of the PBGC.
2) Request specific legal clarification and rationale regarding paragraph 13 of the attached legal agreement between United Airlines and the PBGC.
3) Request confirmation that some or all of the original $5.2-billion has been returned to United Airlines with specific dollar figures and financial arrangements made to accomodate said transaction.
4) FOIA requests made indicate that there is no record of an ERISA-mandated pension audit conducted to determine the financial soundness of employee pensions before termination. Kindly provide records of the federally-mandated audit.
5) There is no record of an ERISA-mandated forensic audit being conducted after the pension terminations. Kindly provide records of the federally-mandated audit.
6) Information regarding the data used in the formulation of the Gross Average Mortality (GAM), which is employed to assess the financial soundness of pension programs is unavailable. Kindly provide the data used to formulate the GAM.
Due to the unique and unprecedented methods employed to distress-terminate the pensions of tens-of-thousands of United employees and retirees, it is herein alleged that possible federal criminal activity, which exceeded PBGC authority and fell outside the legal domain of ERISA, may have occurred. It is legally incumbent upon your office to provide this information to the victims of this possible travesty of justice, while concurrently initiating an immediate investigation into the matter. To date, we have not received much of this information through FOIA requests for such.
Finally, kindly review the attached letter sent by another grassroots organization, the 'Committee for the Restoration of Pensions at United Airlines', in September, 2007 to Senator Daniel Akaka (D-HI) for amplifying information and concerns. I will patiently await your response.
Thank you in advance for your cooperation.
Dan Hanley
Member - Whistleblowing United Pilots Association
***************************************
January 31, 2009
Gordon S. Heddell, Inspector General Department of Labor
200 Constitution Avenue, NW Room S-5502
Washington, DC 20210
SUBJ: WHISTLEBLOWING UNITED PILOTS ASSOCIATION
Dear Mr. Heddell,
The Whistleblowing United Pilots Association is a national grassroots coalition comprised of employees and retirees from all airlines whose purpose is to help discover the truth regarding alleged white-collar criminality associated with post-9/11 airline bankruptcies and serve justice on the criminals who perpetrated these crimes. I serve as a public spokesperson for this group.
As you know, United Airlines employees and retirees suffered huge financial losses as a result of the post-9/11 bankruptcy process, including the distress-termination of pension plans. Evidence has surfaced that strongly suggests said termination may have been achieved by illicit means via collusion between United Airlines senior management, unnamed financial institutions, the PBGC, the Department of Labor, and senior members of the Bush administration. It is for this reason that I write you today.
Besides our association, another grassroots organization, ‘The Committee for the Restoration of Pensions at United Airlines’, has posed multiple questions in the past to both Senator Daniel Akaka and the Office of Inspector General of the Pension Benefit Guarantee Corporation (PBGC) that have largely gone unanswered. Without expounding, I have enclosed these letters for your perusal.
Additionally, on October 18, 2007, I filed for whistle blower protection under the auspices of the Sarbanes-Oxley Act of 2002 in letters to Senator Carl Levin and Securities and Exchange Commissioner Christopher Cox, which I have also enclosed for your review, in addition to a recently transmitted letter to Mr. H. David Kotz, the Inspector General of the SEC.
On October 13, 2007, many members of our association wrote the enclosed letter of petition to then Labor Secretary Elaine Chao imploring her office to investigate the alleged accounting improprieties and purported deceit surrounding the United Airlines Mileage Plus frequent flier program during the bankruptcy, which facilitated the termination of employee pensions. This letter is also enclosed for departmental review.
On February 20, 2008, many of our members also wrote to Ms. Deborah Stover-Springer, Acting Inspector General for the PBGC, asking six specific questions that subsequently went unanswered:
1) Request clarification and legal authority regarding the specific reasons for the ERISA 4047 waiver in light of the weak financial health of the PBGC.
2) Request specific legal clarification and rationale regarding paragraph 13 of the attached legal agreement between United Airlines and the PBGC.
3) Request confirmation that some or all of the original $5.2-billion has been returned to United Airlines with specific dollar figures and financial arrangements made to accommodate said transaction.
4) FOIA requests made indicate that there is no record of an ERISA-mandated pension audit conducted to determine the financial soundness of employee pensions before termination. Kindly provide records of the federally-mandated audit.
5) There is no record of an ERISA-mandated forensic audit being conducted after the pension terminations. Kindly provide records of the federally-mandated audit.
6) Information regarding the data used in the formulation of the Gross Average Mortality (GAM), which is employed to assess the financial soundness of pension programs is unavailable. Kindly provide the data used to formulate the GAM.
Additionally, numerous requests were made under the Freedom of Information Act regarding these same issues, without success.
Since the Secretary of Labor serves as Chairman of the PBGC, although recognizing that this organization serves as a quasi-governmental agency, request is herein made that your office conduct a thorough investigation into these issues and provide a timely response at your earliest convenience. Our association has been stonewalled on countless fronts and occasions the past few years. Given your nonpartisan legal enforcement role within the Department of Labor, we are confident that you will provide answers to the questions raised within the enclosed correspondence to others.
President Obama has intimated in recent remarks his desire to look forward leaving the dreadful Bush years behind us in our legal and political rearview mirrors. Although most Americans agree that the dismal past eight years signifies some of the worst years in our nation’s history and desire to forge ahead, we are a country of laws with a government infrastructure designed to enforce them. To turn our backs on the unlawful past only guarantees that history will once again repeat itself in the future. Airline employees and retirees, especially our association and others, will not do so, as it is our strong belief that federal laws were violated. The white-collar criminals must be prosecuted and brought to justice.
Over 100,000 United employees and retirees at United alone were grossly disenfranchised financially in the allegedly illegal distress-termination of pension plans. If this is the way our government intends to conduct business in the future, then it shouldn’t have required Tim Geitner or Tom Daschle to pay their back taxes and the Department of Justice should exonerate Bernie Madoff for his alleged criminal activity as well. We want to believe that Lady Justice is blind in the criminal prosecution of unlawful behavior in this country. Based on the frustrating past several years experiences of our association, we’ve come to believe this only to be the case with selective issues and individual cases. Kindly prove us wrong in this instance.
President Obama campaigned on a promise of open government, which included the exposition of white-collar corruption, untoward lobbyist pressures, and excessive executive compensation. In this regard, the Whistleblowing United Pilots Association fully supports and encourages his agenda. It is our fervent hope and prayer that your office will join us in our honest and noble crusade to expose potential illegalities surrounding pension terminations, so that history will not be required to repeat itself in the future for the 40-million other hard-working, honest American citizens who still possess defined-benefit pension plans.
Our association fully realizes the global nature of our economy and the fact that workers in India and China, who do not have such pension plans and other perks, challenge the competitiveness of American companies that do. Most workers in our dynamic and mobile economy have 401K accounts readily transferrable to their next place of employment without loss. There are still many who do not.
There is a 'kinder and gentler' avenue of transition to 401K plans in this country, but companies like United and others in bankruptcy need not employ such humanitarian measures, as employees find themselves at the mercy of a bankruptcy judge and secured creditors with the task of the judge being the financial salvation of the corporate entity. Such was the case at United Airlines with the judge being in agreement with the pension termination plan. If evidence suggests that this transaction was wrought by illicit means, then this presents an entirely different legal picture that must be investigated. The financially disenfranchised shareholders and vendors equally demand answers to these questions regarding other fiduciary issues.
On February 14, 2008, I filed a federal complaint (complaint # 2008-9580) with the office of the FBI in Chicago, Illinois pending forthcoming evidence and witness testimony on this and other relevant issues and am in need of the requested information to move forward in the legal arena. Additionally, our association had petitioned numerous relevant congressional committee chairs, as well as key staff members within the Department of Justice for assistance in these matters.
And finally, last week, the Government Accountability Project office transmitted the attached letter petitioning President Obama to move forward with pending enhanced whistle blower protection legislation. You will note that my name/association appear as signatory toward the bottom of this document. It is because of my personal past abuse as a whistle blower on numerous counts, as well as the thousands of other unheard informants, that I strongly support passage of this legislation. Please be advised that I have additionally 'blown the whistle' regarding allegedly fraudulent issues concerning the Department of Transportation and the Social Security Administration concerning personal issues tangentially related to this case in letters to the Inspector Generals of these agencies.
Thank you for your time and consideration of these issues. We will patiently await your response.
Very respectfully,
Dan Hanley
Spokesperson – Whistleblowing United Pilots Association
Encl: Letter to Senator Daniel Akaka
Letter dated October 13, 2007 to Labor Secretary Elaine Chao
Letter dated February 20, 2008 to Ms. Deborah Springer-Stover, Acting PBGC OIG
Letter dated October 25, 2007 to Senator Carl Levin, Chairman, Senate Permanent Subcommittee on Investigations
Letter dated October 25, 2007 to Christopher Cox, Chairman, Securities and Exchange Commission
Affidavit dated October 25, 2007 of Daniel W. Hanley
Letter dated January 28, 2009 to H. David Kotz, Inspector General, Securities and Exchange Commission
Cc: Senator Charles Grassley – Ranking Member, Senate Finance Committee
Senator Carl Levin – Chairman, Senate Permanent Subcommittee on Investigations
Senator Daniel Akaka - Chairman, Government Management, the Federal Workforce and DC
Congressman Henry Waxman – Chairman, Government Oversight Committee
Hilda Solis – Secretary of Labor
Rebecca Anne Batts - Office of Inspector General, Pension Benefit Guarantee Corporation
Charles E.F. Millard – Director, Pension Benefit Guarantee Corporation
Mary Schapiro – SEC Chairman
Merri Jo Gillette – SEC Midwest Regional Director
Rita Glavin – Acting Assistant Attorney General, Criminal Division
Robert Mueller – FBI Director
Patrick Fitzgerald – District Attorney for the Northern District of Illinois
Robert Grant – Chicago FBI Special Agent-in-Charge
Tom Devine – Government Accountability Project Legal Director
Members of the Whistleblowing United Pilots Association
******************************************
U.S. pension insurer's deficit spikes
PBGC forecasts grim future, calls for 'long-term solution'
By Associated Press
Saturday, November 14, 2009
The government-chartered company that insures the pensions of one in seven Americans said Friday that its deficit this year nearly doubled to $22 billion.
That's an improvement over the Pension Benefit Guaranty Corp.'s midyear record deficit of $33.5 billion, which spiked as automakers and other companies faltered and caused the insurance fund's liabilities to spike.
Yet experts and officials say the long-term picture is grim. They say that without major changes, such as higher insurance premiums and less risky investments, the fund eventually will require a taxpayer bailout.
"We could face much higher deficits in the future," PBGC Acting Director Vincent Snowbarger said in a statement. "We won't fail to meet our obligations to retirees, but ultimately we will need a long-term solution."
The PBGC's finances this year have been battered by the weak economy, which put it on the hook for 144 new pension plans that failed in the fiscal year ended Sept. 30. That compares with 67 in the previous year.
Low interest rates added to the sea of red ink because the PBGC can't count on inflation to drive down the value of future payouts. It also faced losses on stock investments made by investment advisers and by the pension funds it took over -- though the recent market rally has helped the PBGC net an investment return of 13.2 percent for the year.
These fluctuations can hide the fundamental problems with the pension insurance system, said Bradley Belt, a former PBGC executive director and now chief executive of financial consulting firm Palisades Capital Advisors.
"People focus too much on what the number is," Belt said. "A lot of what's going on is bookkeeping or accounting that mask, unfortunately, the long-term problem."
The PBGC is responsible for the benefits of 1.5 million Americans. It sends checks each month to 740,000 pensioners. It is funded entirely by fees paid by the companies whose pensions it insures.
Congress sets those fees, and it has been reluctant to raise them in the face of opposition from business and labor groups. Because the fund isn't expected to run out for a decade or more, there is little impetus to raise rates.
Indeed, some lawmakers have introduced legislation that experts say could further expand the PBGC's deficit. A bill introduced last month by Rep. Earl Pomeroy (D-N.D.) and others would allow employers to reduce contributions to pension funds.
The bill is intended to reduce companies' costs so they can withstand the economic slump and support a recovery. But it also could force the PBGC to take over some liabilities from plans that cover multiple employers. Under the current system, those costs are covered by the remaining companies if one partner in a pension plan goes bankrupt.
That's especially troubling, experts said, because the PBGC has only about $1.46 billion of assets available to cover multi-employer plans, meaning insolvency in that area could come much sooner.
Pomeroy's office did not respond to requests for comment.
Congress' reluctance to increase costs to employers has led to growing shortfalls. The PBGC has been in the red for 29 of its 35 years of operation.
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