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News - January 2001
Yahoo Finance - January 31, 2001
Though Company Did Not Exist When He Retired
According to a class action suit filed today against Hewlett-Packard Company by one of its Gold Badge retirees, the company has reneged on a pledge to provide retirees with lifetime rebates on purchases of HP products.
The class-action suit was filed by Mark G. Leonard, an HP employee of 23 years who is the sole inventor of four patents assigned to HP. Mr. Leonard is one of more than 3,800 HP retirees who have been informed by the company that they are no longer eligible for the Employee Purchase Rebate Program, despite the fact that the company continues to provide this benefit to other HP retirees. Mr. Leonard retired from HP in 1998 after accepting the company's voluntary retirement program.
According to Mr. Leonard's complaint, HP in 1999 re-classified him and others as a retiree of HP's newly spun-off company Agilent, even though he had always worked for HP. Upon his retirement from HP, Mr. Leonard became a Gold Badge Retiree (age 55 or older with 15 years of service). Agilent did not exist at the time of Mr. Leonard's retirement.
``I retired from Hewlett Packard with the agreement that I would enjoy lifetime use of the product discount program,'' said Mr. Leonard. ``The voluntary severance package offered included a product discount program, which was to me an important element of the overall package. The company has informed me that HP has the right to change the design of its benefits programs but I do not believe they have the right to unilaterally change the terms of our contract without my consent or to say that I retired from Agilent, which did not exist and which I had never heard of at the time I retired.'' Mr. Leonard has corresponded with Carly Fiorina, HP's Chief Executive Officer as well as other executives of the company and has not received a response satisfactorily addressing the issue.
Ronald Katz, Mr. Leonard's attorney at the law firm Coudert Brothers in Palo Alto and San Francisco, stated that HP breached the contract by failing to fulfill its obligation to allow Mr. Leonard and other retirees to participate in the Employee Purchase Rebate Program. He said, ``Based upon arbitrary reclassifications of Mr. Leonard and thousands of other HP retirees, Hewlett Packard believes it can deny the promises it made in connection with these product related rebates. Saying that someone retired from a company that did not exist when he retired and that he'd never heard of is outrageous. We believe that this class action will require HP to reinstate this policy for all the members of the class.''
HP's response to the complaint is due in thirty days.
Boston Globe - By Diane E. Lewis - January 28, 2001
Robert A. Rehm was a manager at Nynex Corp. in New York when he accepted a buyout 10 years ago and retired early, convinced that his benefits would remain the same and he would never have to worry about his company-sponsored health care plan.
But a lot happened at Nynex after Rehm left: In 1995, Nynex switched retirees to a health maintenance organization. In return, Rehm received a monthly refund check for $144 to cover the difference between the current and former plan. Then, in 1997, Bell Atlantic Corp. purchased Nynex for $23.7 billion. Soon after, the monthly refund checks stopped, and Rehm started getting bills for health care for the first time. His monthly payments have since increased from $5.68 in 1998 to $19.12 today.
"I reported to a vice president who personally told me that my medical benefits package wouldn't change," said Rehm, 60, of Jericho on New York's Long Island.
Angered by the changes, Rehm joined a nationwide movement of retirees who are demanding better health care coverage and cost of living increases for their pensions. Called the Coalition for Retirement Security, the umbrella organization has grown to 1.3 million from 200,000 members since its inception in 1996. Originally made up of retiree groups, the nonpartisan coalition now includes organizations that serve current employees. The lure? Disappearing benefits.
"People are seeing their pensions and health care benefits being stripped away before they even retire, before they walk out the door," said chairman Paul Edwards of Springfield.
The coalition is backing federal legislation that would bar employers from changing workers' health benefits after they retire. Under the measure, known as the Retiree Health Benefits Protection Act, companies that reduced or eliminated benefits for retirees would be required to reinstate them.
Faced with skyrocketing costs, many employers have stopped offering retiree health benefits or decreased funding for existing plans, according to a new study.
The survey by William M. Mercer Inc., a global human resources and benefits firm, found the number of large employers offering health care coverage for retirees under age 65 fell from 35 percent to 31 percent last year. Additionally, the number offering health benefits for retirees age 65 and older dropped to 24 percent from 28 percent.
Though 31 percent of the nation's employers still cover retirees under 65, that percentage is down from 46 percent in 1993. It is expected to drop further as the cost of medical care rises.
Health care costs rose 8.2 percent nationwide between 1999 and 2000, according to Mercer. In Massachusetts, by contrast, costs increased a whopping 10.2 percent in the same period.
"More than 50 percent of the costs for the over-age-65 population are pharmacy benefits, which are increasing at a rate of 18 to 22 percent per year," said Mark Abate, a principal at Mercer. He attributed the decline in the percentage of employers providing retiree coverage to companies terminating plans, and to new organizations deciding not to offer the benefit at all.
"Employers who do offer the benefit have to look for ways to get those costs under control if they want to mitigate this trend," said Abate. "Many are implementing three-tier copayment plans that allow current and former employees to choose from a list of generic, brand name, or nonpreferred drugs that are offered at different prices."
Mercer, which expects retiree health care coverage to emerge as a significant issue in the next Congress, surveyed 3,300 US employers last year.
The likelihood of the retiree health benefits bill passing appears slim. But US Representative John Tierney, a Massachusetts Democrat and a sponsor of the bill, expects it to generate considerable debate and support among retirees.
"I've had letters from a Sears' retiree group with 133,000 members as well as letters from General Electric retirees and telephone company retirees," Tierney said. "Companies may resist it and they will likely tell us how expensive health insurance is, but we've got to have health care that covers people and gives them good benefits."
John Rother, legislative director for AARP in Washington, D.C., attributed reductions in employer-sponsored health care coverage for retirees to changes in accounting rules and soaring health care costs.
In the early 1990s, new federal accounting rules required companies to document in dollar amounts the total value of all pledges to provide future health care benefits. In the past, employers were allowed to account for such costs from year-to-year, and they could pay whatever was necessary in a particular business cycle and subtract that amount from total income.
At the time the rule was introduced, critics argued it would sharply reduce the pretax profits of employers. That concern caused some companies to reduce financial backing for the benefit, Rother said.
Rehm expected the telephone company to continue his health benefit - free of charge - until his death. The company, whose recent merger with GTE led to the new name, Verizon, acknowledged that changes were made to some benefits for retirees and active employees.
"But [Verizon] also pays nearly 99 percent of the cost of health care for retirees," said spokeswoman Sharon Cohen-Hagar, who said she could not comment on Rehm's situation.
Mable Graham, 72, of Mattapan, never expected to have to worry about health care costs. Graham, who retired from Polaroid in 1988, said her health care costs for the company plan rose from zero to $76.70 per month in recent years.
"In 10 years, it could cost me $200 a month for health insurance," Graham said. "That's a lot of money for an older woman. People over 65 are getting ripped off."
Polaroid says its contribution to retiree health care has not gone down but remained flat in the face of increasingly high medical costs. "We pay 75 to 80 percent of the cost of health care for retirees," said William Hubert, manager of corporate benefits. "For the plan she is in, one of the highest cost plans, the firm covers 70 percent."
He added that when Graham left in 1988, the company's contribution covered 100 percent of her costs.
"We're paying the same amount, but we have slowed the rate of our contributions so the retirees are picking up a larger share of the costs," Hubert said. "Times are tough. Medical costs are going up very rapidly. Ours went up 20 to 30 percent last year depending on the plan. It's a critical problem."
The Charlotte Observer - By AMES ALEXANDER - January 21, 2001
Barbara Clayton never much trusted the stock market. Too risky, she says.
But for cautious investors such as Clayton, the pitch by a Concord insurance agent seemed irresistible: Buy pay telephones and earn 15 percent interest. Get your investment back any time.
Clayton and her husband invested $12,000, most of their savings.
"He said there was no way we could lose our money," said Barbara Clayton, 58, a hosiery mill supervisor from Concord. "No way in the world."
Now, she worries she might have lost it all.
About 15,000 investors, many of them retirees, put roughly $400 million into ETS Payphones, a Georgia-based company that filed for Chapter 11 bankruptcy protection in September after an investigation by the federal Securities and Exchange Commission.
More than 2,200 investors were Carolinians, and many of them put up their life savings.
A federal judge concluded ETS misled investors, and failed to tell them something they needed to know: ETS was in precarious financial shape. The SEC said ETS operated a massive Ponzi scheme - a ploy in which money from new investors is used to pay old ones.
Advocates for the elderly say it illustrates a disturbing trend. As the Carolinas become bigger retirement destinations and their elderly populations grow, some insurance agents and financial advisers are persuading senior citizens to put hard-earned retirement money into questionable investments.
ETS's founder, Charles E. Edwards, 62, has declined requests for interviews. But in court papers, his lawyers contend the company isn't a Ponzi scheme and hasn't defrauded anyone.
It's unclear whether investors will ever collect more than a fraction of their principal.
ETS lawyers say a company reorganization would ultimately help investors get money back. But both sides agree it's unlikely investors will recover much anytime soon.
"It's extremely optimistic for anyone to believe that there's $400 million sitting out there for the investors to get back," said Shannon Nagle, an ETS bankruptcy lawyer. "The money's just not there."
ETS began business in 1994 and has since become the nation's second-largest independent payphone company, growing from 22 phones to more than 40,000.
Based in the Atlanta suburb of Lithia Springs, the company owed much of its success to enticing sales claims, usually made by independent insurance agents and financial advisers.
Investors could buy payphones, most recently for $6,000 to $7,000 apiece. They'd get a monthly return of about $80 per phone, and they could recoup all their money simply by giving 180 days' notice and selling their phones back to the company. The sales agents, meanwhile, earned big commissions. Investors could lease payphones back to ETS, which would install, manage and maintain them.
Sales brochures promised a "virtually recession proof" investment. Bold headlines invited owners to "Watch the Profits Add Up."
With about 2,000 investors, North Carolina was one of ETS's strongest markets. And no place in the state was home to more investors than the mill towns of Concord and Kannapolis, where agents for a financial services company called Foil and Associates pitched the program.
One evening about two years ago, in a crowded banquet room at the Kannapolis Country Club, hundreds of investors and prospective investors came to hear Edwards, the company's owner and top official. Don and Sarah Sellers, a Concord couple approaching retirement age, had already invested about $50,000 in the payphones.
As Sarah Sellers remembers, Edwards told jokes, quoted the Bible and promised a sure thing. He reminded her of her grandfather and she trusted him right away.
"He said he prayed every day about his business," said Don Sellers, 65. "And he gave part of it back to the Lord. "That probably hit 99 percent of us. This man of God had come to us with a good business opportunity." Don and Sarah Sellers left the meeting confident and eager to invest more. Soon, they put up about $50,000 more - the rest of their savings.
The Observer interviewed 12 investors from the Charlotte region, and most said they were attracted to ETS because it seemed so safe.
"It was portrayed that the future risk was virtually nonexistent," said Charlotte dentist David Britton, 44, who invested $24,000
Cornelius lawyer John Hanzel, who's representing more than a dozen ETS investors in lawsuits, said he has seen a letter from one broker who claimed the investments were "guaranteed, bonded and insured." "Three lies in one sentence," Hanzel said.
At the center of the federal investigation is Edwards, the company's chief pitchman.
A high school graduate with no professional licenses, the Tennessee native worked a variety of jobs before building his corporate empire. From the late 1950s to the 1970s, he joined the Air Force, wrote technical manuals and even cleaned carpets.
In the 1980s, he helped found American Marketing Group, which sold automotive and health-care products and ended in bankruptcy.
He later worked as a salesman for the Atlanta-based A.L. Williams Corp., a controversial insurance company whose aggressive, mostly part-time agents made it wildly successful despite frequent regulatory investigations and criticism from consumer groups.
In the early 1990s, Edwards and a partner founded a company that sold payphones, then started ETS to supply and manage the phones.
Helped by the 1996 deregulation of the payphone industry, which lowered expenses for independent entrepreneurs, ETS's sales soared.
But by early 2000, the company had drawn the attention of securities regulators. In March, Edwards was interviewed by SEC agents investigating whether the company violated securities laws.
Still, Edwards reassured investors. In a July 2000 letter, he told them the company was financially stable. "we made a profit of $8,700,000 last year and our profit potential looks even better for this year," he wrote. "There has never been a better time to be in the payphone industry."
The checks to investors came regularly - until September, when different mail arrived. Investors were told the company had filed for Chapter 11 bankruptcy protection.
When Dona Hunter read the letter, she wept.
Hunter, 70, works as a hostess at a Derita funeral home, sometimes 60 or more hours a week. She had invested $19,000, most of her savings, and planned to use the profits to fund her retirement.
Now, she said, she'll need to keep working as long as she can.
"I just have to cut back on everything - everything," she said.
Eighty-seven-year-old Molly Sutton, from Concord, invested $280,000 in 1999. She died last May, and the next month the executors of her estate asked ETS to liquidate her phones and return the money.
In a July letter, ETS responded that the liquidation could take up to 180 days. But then, in mid-September, the company filed for bankruptcy protection.
Hanzel, who's representing Sutton's estate in a lawsuit against the Kannapolis company that sold the investment, said he has spoken to hundreds of North Carolinians who put their money into ETS. He estimates three-quarters of them lost all their retirement savings. One, from Concord, invested more than $1 million, he said.
ETS officials blamed their financial troubles on rising cell phone use, declining payphone collections and other pressures hurting the entire payphone industry.
On Sept. 29, the SEC filed its complaint. Regulators contended investors weren't told the company was losing millions on its operations.
"ETS has consistently been dependent on the sale of new payphones in order to meet its lease and refund obligations," the SEC wrote.
The commission also said agents for the company were selling unregistered securities.
Under pressure from regulators, ETS stopped selling its payphones. A federal judge granted a preliminary injunction and froze Edwards' assets.
At least three states, including North Carolina, have issued cease and desist orders against ETS and its sales agents. In court filings, Edwards' lawyers disputed the SEC's contentions. They insist ETS is not a Ponzi scheme.
Ponzi schemes derive their name from Charles Ponzi, who defrauded thousands of investors in 1920 when he claimed they could make huge profits from international postage coupons. Instead, his Boston company was using money from new investors to pay off old ones. When the scheme collapsed in its first year, many of the late investments were worthless.
"Unlike Ponzi schemes, here there is a real company, with real assets and real business operations," Edwards' lawyers wrote in response to the SEC claims.
"The recent downturn in the company's fortunes is not the inevitable self-destruction of a Ponzi scheme, but rather the result of independent, unforeseen, and uncontrollable market forces. There simply is no fraud and no Ponzi scheme involved here."
Where did all the money go?
While much of it went toward the telephones, the operating expenses and the monthly checks for investors, millions of dollars allegedly were poured into lucrative sales commissions. According to the SEC's complaint, $1,500 of every $6,750 sale - or about 22 percent - went to marketing companies. The National Association of Securities Dealers recommends that commissions for brokers generally not exceed 5 percent.
Regulators say Edwards got a generous share of the money.
ETS lent more than $11 million to affiliates controlled by Edwards, and paid more than $3 million in fees to those companies, according to the SEC. An examiner appointed by the bankruptcy court concluded more than $20million was fraudulently transferred from ETS. And some of the money appears to have benefited Edwards, his family and friends, the examiner reported this month.
Court records show that in 1998 and 1999, Edwards also received $2.2 million in compensation from ETS and a related company he controls.
Edwards owns real estate valued at more than $7 million, including a 5,000-square-foot house on Sea Island, Ga., that's on the market for $4.2 million.
One of Edwards' companies also owned a NASCAR racing team, sponsoring Kannapolis driver Tommy Ballard in the Goody's Dash Series
Edwards has denied misappropriating corporate funds and has said he will work to ensure the subsidiary companies repay the loans to ETS. In their court filings, Edwards' lawyers said the loans were made for legitimate business purposes and that Edwards received no money beyond his salary.
"There is no evidence here that Mr. Edwards has secreted assets from ETS or has taken any action to dissipate any assets of that company," the lawyers wrote.
Edwards has resigned from the top executive positions at ETS, and has agreed to cooperate in an investigation of what he owns and owes, according to ETS lawyer Nagle.
"I don't think under any stretch of the imagination he's going to be held liable for $400 million, nor does he have $400 million," Nagle said.
Now creditors want to see someone independent at the company's helm, because they contend Edwards and his allies continue to control ETS behind the scenes. ETS has agreed to the appointment of a new chief executive officer, provided it is involved in the selection.
Two of Edwards' sons are still drawing paychecks from the company and its subsidiaries. Jason Edwards, 32, the company's chief operating officer, earned $120,000 a year along with a vehicle allowance, according to recent financial statements. C. Rock Edwards, 34, vice president of sales and customer service, got $100,000 per year and a company-paid vehicle from an ETS subsidiary.
Before the bankruptcy protection filing, ETS paid about $5 million monthly to investors.
Now it has stopped those payments.
But even that has not allowed it to make big profits. ETS is earning about $6 million a month, and spending about $5 million, Nagle said. The company also must pay lawyers and other professionals hired in the bankruptcy proceedings.
If ETS were still making payments to phone owners, it would be losing millions.
Hanzel, the Cornelius lawyer, is skeptical that investors will ever recover much money through a corporate reorganization. The debt is too huge, he said, and the company's finances are too shaky.
Now thousands of investors are wondering whether they'll recover any of their money.
The night after Barbara Clayton got news of the bankruptcy filing, she couldn't sleep. Her husband will probably have to delay his retirement, she said.
"We thought we were going to retire and have a good life," she said. "But it's not going to happen."
Still, ETS staff attorney Joel Geer said he's optimistic. He said the best solution may be to give investors shares in ETS, which he predicts will become valuable as the company finds new ways to make money.
Edwards suggested one possibility in March during a three-hour interview with SEC agents.
The concept: selling advertising space on payphones.
Speaking as he might have to a room full of investors, Edwards called the idea "manna from heaven."
"I've got 20,000 convenience stores out here that tobacco is screaming for someplace to advertise," he told SEC agents.
ETS Payphones, he said, could well be that place.
As more senior citizens settle in the Carolinas, more schemes and scams are sure to follow them. If you or your friends or family members have been victimized, please call reporter Ames Alexander at (704) 358-5060, or send e-mail to email@example.com
Yahoo News - January 11, 2001
CHARLOTTE, N.C., Jan. 11 /PRNewswire/ -- The three nuclear stations operated by Duke Power set new standards in efficiency and reliability in 2000 by generating more electricity than ever before. Duke Power is a business unit of Duke Energy.
The stations -- Oconee in Seneca, S.C., Catawba in York, S.C., and McGuire in Huntersville, N.C. -- had a combined capacity factor of more than 92 percent in 2000. Capacity factor is the measure of how much electricity is produced, compared with the amount of electricity a unit is capable of producing, within a given time period. Duke Power operates seven nuclear units (three at Oconee and two each at McGuire and Catawba) that produced 56,739,054 megawatt-hours of electricity in 2000, more than half of the energy used by Duke Power's 2 million customers.
The company's best previous year was 1999, when the nuclear stations recorded a capacity factor of just under 90 percent and generated nearly 55 million megawatt-hours of power.
``The nuclear industry in general has been improving significantly over the years, and it is our goal to be at the forefront,'' said Michael S. Tuckman, executive vice president of nuclear generation. ``We are building a winning team of dedicated employees and managers armed with the knowledge, experience and equipment necessary to achieve our goal.''
The Oconee capacity factor in 2000 was approximately 92 percent -- the highest in the station's 27-year history. The highest previous mark was about 91 percent in 1993.
McGuire's capacity factor last year was almost 96 percent, the second highest in its history. The all-time best year for McGuire was 1998, when the capacity factor was more than 97 percent.
In both years, the station only had one refueling outage. The difference was that the 2000 outage included additional maintenance work and was longer than the one refueling outage in 1998.
Catawba's 2000 capacity factor was more than 90 percent, second highest in its history. The all-time best year for Catawba was 1999, with a capacity factor of about 91 percent.
Catawba only had one refueling outage in 1999, while 2000 had two refueling outages.
The accomplishments in 2000 were achieved despite having refueling outages at five of the seven units during the course of the year. The two units that did not refuel, McGuire unit 1 and Oconee unit 2, had capacity factors of approximately 103 percent and 101 percent, respectively.
The year 2000 was the first year in which the company broke the 90-percent plateau.
``Not only did we have an excellent capacity factor, our units were at full power during all peak usage periods, ensuring that Duke Power could meet its customers' demands,'' said Tuckman.
Oconee Nuclear Station is a three-unit power plant located on Lake Keowee, near Seneca, S.C. Each of its units can generate electricity at the rate of 846 megawatts. Oconee unit 1 began commercial operation in 1973; units 2 and 3 in 1974.
Catawba Nuclear Station is a two-unit power plant located on Lake Wylie in York County, S.C. Each of its units can generate electricity at a rate of 1,129 megawatts. Catawba unit 1 began commercial operation in 1985; unit 2 in 1986. The station is jointly owned by North Carolina
Municipal Power Agency Number 1; North Carolina Electric Membership Corporation; Piedmont Municipal Power Agency; Saluda River Electric Cooperative Inc; and Duke Power.
McGuire Nuclear Station is a two-unit power plant located on Lake Norman, near Huntersville, N.C. Each of its units can generate electricity at a rate of 1,100 megawatts. McGuire unit 1 began commercial operation in 1981; unit 2 in 1983…
SOURCE: Duke Energy Corporation
Bloomberg News - January 8, 200
The U.S. Supreme Court refused to buttress the power of companies to reduce layoff benefits they promise workers, rejecting an appeal by Viacom in a dispute with a former employee.
Harry Bellas' lawsuit contends that federal pension law bars companies from cutting retirement benefits for laid-off employees. A federal appeals court last year cleared the way for the suit to proceed.
The appeals court said the so-called accrued shutdown benefits are entitled to the same legal protection as retirement benefits, which companies may not reduce once employees have put in the required years of service.
The ruling comes as many companies, particularly in the technology and Internet sectors, are laying off employees in efforts to cut costs. Although many cite declines in their stock values and the need to achieve profitability as reasons for layoffs, strategies such as Viacom's benefits reductions could also be seen as cost-cutting measures. Employer groups rallied around the Viacom appeal, saying the lower court improperly curtailed employer flexibility to make changes to employee benefit packages.
The dispute "will have far-reaching effects on employee pension plan design and administration," the employer-sponsored ERISA Industry Committee and the American Benefits Council said in a filing that urged the court to take up the case.
The legal fight centers on the Employee Retirement Income Security Act, or ERISA, which sets the rules for employer-sponsored pension, health and disability plans.
Bellas worked at CBS, now part of Viacom, for 33 years until he was laid off in 1997. He contends that he and other employees are entitled to the same retirement benefits they would have received under an earlier version of the company's pension plan.
Before 1994, CBS let laid-off workers who met age and service requirements begin receiving retirement benefits before the normal retirement age. In 1994, the company amended the plan to limit the benefits to workers laid off because of a location shutdown, job movement or other specified reason.
Bellas contends the change violates a provision of ERISA that bars companies from cutting accrued retirement benefits. The Philadelphia-based 3rd U.S. Circuit Court of Appeals agreed in a 3-0 decision.
The payments to Bellas are "an accrued benefit that could not be reduced or eliminated by amendment," the worker's lawyers argued in a court filing.
Viacom argued that its shutdown benefit is similar to a health plan offering, which employers are free to change under ERISA. "The decision below is riddled with error," the entertainment and publishing company argued in its appeal.
Companies contend the 3rd Circuit ruling jeopardizes the special tax status of some pension plans.
AScribe News - January 5, 2001
As the economy slows, the worsening performance of employment-based pension plans underscores the need to maintain Social Security, notes Merton C. Bernstein, the Coles Professor of Law Emeritus at Washington University in St. Louis. An expert on Social Security and retirement plans, Bernstein described the problems with employment-based pension plans to the Committee on Employee Benefits at the American Association of Law Schools Annual Meeting today in San Francisco.
In recent years, private pensions:
"Private pension performance has been unimpressive," Bernstein said. "Even in boom times, employment-based pension plans exhibited what Lincoln said of his Virginia generals, 'They have a case of the slows.'" Despite this reality, "there is little, if any, awareness of the serious structural problems in private or state and local public employer-sponsored plans," said Bernstein, co-author of the book "Social Security: The System that Works."
The tax expenditure cost to the Treasury for employer-sponsored plans is projected to total $416 billion during the first five years of this century, Bernstein said. These vast subsidies flow mostly to those already well off. "Women and minorities are less likely to be in plan-covered jobs, and their more sporadic employment reduces their chances of obtaining benefits," he said. Bernstein observed that under 50 percent of full-time employees - the group most likely to be eligible for pension plans - are covered under such plans. "Should the economy slow, as now appears likely, the private pension picture should get even darker," Bernstein said. "Increased layoffs will shrink the number of active employees covered."
Although the Employee Retirement Income Security Act (ERISA) was designed to shore up pension plans for employees, Bernstein observed that the measure permits plans heavily favoring employers' interests. Even with 401(k) plans, company stock comprises 18 percent of the average plan's assets. This is true even though "pension experts agree that it is unsound to tie employees' current and retirement income to the same source," he said. Bernstein added that state and local plans - which are not subject to ERISA requirements - are in even worse shape. "Such plans are less accountable and frequently subject to damaging political games," he said, citing problems with state retirement plans in Missouri and Ohio. With the lack of public understanding and no one leading the charge for reform, Bernstein does not envision improvements to private or public employer-sponsored plans any time soon. The prospect for retirees "is not pretty," he said. "The worsening outlook for private pensions makes Social Security so much more essential to future retirees," Bernstein concluded.
New York Times - By KEVIN SACK - January 4, 2001
Managers at the world's largest pork processing plant, the Smithfield Packing Company's slaughterhouse in Tar Heel, N.C., committed "egregious and pervasive" labor law violations during two unionizing campaigns in the 1990's, an administrative law judge has ruled.
The judge, John H. West, also ordered the company to adopt numerous policies giving the union, the United Food and Commercial Workers, a fair shot in its next election.
Judge West's sweeping opinion, which was issued on Dec. 15 and runs 436 pages, finds that 11 Smithfield workers were illegally fired because of their union sympathies and must be rehired with back pay. The judge concluded that other workers had been threatened and improperly interrogated about their union activities, that the company had warned of layoffs and a possible plant closing if the unionization campaign succeeded and that one pro-union employee had been assaulted in retaliation for his organizing efforts.
Workers at the Smithfield plant were so intimidated by management, Judge West ruled, that any future election should be held outside the plant and possibly even outside the county because of the company's influence in the area. Judge West, working for the National Labor Relations Board, set aside the results of the most recent election, in 1997, which the company won with 63 percent of the vote. He also wrote that several of the company's lawyers and managers had lied under oath in hearings on the case. He raised the possibility that one lawyer had suborned perjury and that another had knowingly introduced false statements at the hearing.
Despite the inevitable delay in carrying out the ruling, union officials greeted Judge West's decision jubilantly and said it would give them a significant lift in their effort to unionize the North Carolina plant.
Because the plant is the world's largest pork-processing plant, with more than 5,000 employees, the lack of a union there has depressed wages across the industry, said Greg A. Denier, director of communications for the union. Mr. Denier said he hoped the ruling would buffer Smithfield workers from the company's pervasive influence in Tar Heel and Bladen County.
"Smithfield has such power in the community that there is tremendous pressure that they put upon workers," he said. Among the judge's findings was that company officials had sought to scare the plant's sizable Hispanic work force by warning that the union, if successful in organizing the plant, would report workers to the Immigration and Naturalization Service. The New York Times found last year that labor at the plant was largely stratified by race among white workers, black workers and Hispanic workers and that racial tensions emerged regularly.
North Carolina, with its laws against compulsory unionization, is a difficult place to organize. But the union may have reason for hope.
In 1999, the Union of Needletrades, Industrial and Textile Employees won a unionization vote at a Fieldcrest Cannon plant in Kannapolis, N.C., that had beaten back organizing efforts for 25 years. That vote also came after the National Labor Relations Board had repeatedly penalized the company, though the union's success was attributed more to a change in corporate ownership, the demands of modern production lines and the growing presence of union-friendly immigrants in the work force.
Judge West's report is replete with details about how Smithfield fired workers who, he concluded, would not have been dismissed were it not for their union activities. In case after case, he heard testimony from the workers and from company officials and then found that the managers lacked credibility.
He aimed particular criticism at the plant's general manager, Jere Null, who he said was "not a credible witness." The judge concluded that Mr. Null was responsible for positioning 8 to 10 county sheriff's deputies in the plant parking lot on the day of the 1997 election as an intimidation tactic, and he dismissed Mr. Null's claim that he did not know in advance about their presence.
"Null not only knew that they were there, Null was responsible for them being there," Judge West wrote. "Null wanted to make a point that the Tar Heel plant was his plant, the union was going to pay a price for its attempt to organize the employees who worked there, and employees who supported the union would have an old-fashioned example of what can occur when they try to bring in a union."