Plundering the Pensions
On October 4, 1999, Halliburton CEO Dick Cheney announced the sale of a business unit, a decision that robbed $25 million from worker pensions. Workers wondering where all that money disappeared may look to Cheney’s own pension. That’s because nine months after plundering $25 million from the pension, Halliburton’s board of directors, with Cheney as its chairman, awarded Cheney a $20 million pension. And it was all legal. This is the stuff of Oliver Stone's fictional Wall Street raider Gordon Gecko.###
When companies buy and sell other companies, as Cheney did while CEO of Halliburton, a loophole in the pension law allows for the looting of hard-earned money paid into pensions.
The story begins in 1998 with the $7.7 billion stock merger of Halliburton and Dresser Industries, which owned Dresser-Rand at the time. Dresser-Rand makes equipment for the oil and chemical industries. Halliburton sold off Dresser-Rand seventeen months after the merger with Dresser Industries, creating a $215 million profit.
Halliburton continued to administer the Dresser-Rand “defined-benefit” pension plan after the company was sold. But the old Dresser-Rand pension fund was shifted into a less generous Halliburton pension fund to help pay for retired Halliburton employees.
Pension law requires that “defined-benefit” pension plans, like the one involving Dresser-Rand, can only be used for employees who pay into the plan. So, Halliburton was arguably prohibited from shifting Dresser-Rand’s pension to finance Halliburton’s pension. But, as is usually the case in the current anti-regulation environment, the law is rarely enforced, partly because it is confusing and complex. But shifting the pension proved lucrative for Halliburton and it helped finance Cheney’s own pension.
The Ad Hoc Coalition to Restore Retirement Security said shafting Dresser-Rand workers “cost them the full early retirement pensions they had spent their careers working for.” Each worker lost an average of $50,000 because of the scam.
The Ad Hoc Coalition wants Congress to stop companies from using the sale of subsidiaries "as a pretext to short-change employees of their promised pensions."
"It's scandalous," Norman Stein, a pension expert told the New York Times. "It's treating the assets of the plan as corporate assets that can be bought or sold."
Cheney has a history of approving exorbitant pensions for senior executives. He spent years on various corporate compensation committees, which determine the compensation for senior executives. For example, during the 1990s, Cheney sat on compensation committees for Union Pacific, Electronic Data Systems and Procter & Gamble. The Washington Post reported “a number of shareholder activists chastised Cheney for going along with what has become a common practice of lavishing large bonuses on departing chief executives.”
Congress passed pension reform legislation in April. It is expected to be signed into law by President Bush. But, not surprisingly, the legislation does nothing to prevent companies from raiding pension plans as a means to finance corporate mergers and acquisitions. Nor does it prevent the use of worker pensions to finance exorbitant pension benefits of former CEOs like Dick Cheney.