Can judge wipe out workers’ pensions?
By
Milt Neidenberg
Published May 19, 2005 7:44 PM
It ain’t over ‘til it’s
over.
Eugene R. Wedoff, an anti-union U.S. bankruptcy court judge, has
wiped out the pension funds of four unions at United Air Lines. With a stroke of
the pen, the judge killed $9.8 billion in contractually guaranteed pensions won
over decades of sacrifice and struggle.
Can he make it stick?
UAL
flight attendants, retirees, active employees and other union members, who
packed the court, will yet have the last word. Starting May 10, they took time
off from their jobs and poured into Chicago from many parts of the country to
vent their fury over the decision.
The overflow crowd spilled into other
court areas. They cheered their lawyers as they defended the pensions and booed
the super-rich UAL executives who attended the hearing. Following the
court’s illegal decision, union members chased UAL Chief Financial Officer
Frederick F. Brace III down the street into a bar chanting “CHAOS!
CHAOS!,” an acronym for Create Havoc Around Our System.
CHAOS
strike coordinators are in place to mobilize a massive fightback. The Associ
ation of Flight Attendants/Com muni cations Workers of America (AFA/ CWA), has
overwhelmingly authorized the use of CHAOS strikes to protest any unilateral
changes in the contract.
An unprecedented swindle
The
pensions, called defined benefit con tribution plans, were signed and sealed
over many years to assure employees a modest but guaranteed nest egg for
retirement. They were to be held in trusts, as property belonging to the
retirees and current members, who contribute the labor power, skills and
experience that keep UAL flying.
Judge Wedoff exceeded his authority by
abrogating the four pension plans. He conspired with UAL and the Pension Benefit
Guarantee Corporation (PBGC), a quasi-independent government insurance agency,
to rob over 120,000 employees of their righteous equity.
With a stroke of
the pen, he cleared the way for the largest pension default in U.S. corporate
history. By approving UAL’s proposal to turn over four underfunded
employee pension plans to the PBGC, UAL has walked away from $3.2 billion owed
to the workers and retirees and dumped $6.6 billion of its fiduciary
responsibility on this government-sponsored agency, which is already deep in the
red.
Pension funds in crisis
Last year the PBGC’s books
showed $62 billion in long-term obligations to pay workers’ pensions, but
only $39 billion in assets. The $23-billion shortfall was double the previous
year’s gap and continues to grow. The agency has taken over the pension
plans of 141 bankrupt steel companies, with underfunding totaling $10.2 billion,
and 12 airlines, including UAL, with underfunding of $11.6 billion.
In
other words, bankruptcy has become a convenient way for corporations, which have
paid out billions in profits to managers and owners, to foist their pension
obligations onto the taxpayers.
By its own estimate, the defined benefit
pension plans guaranteed by the PBGC are underfunded by a total of $450 billion.
According to the Center on Federal Financial Institutions, a Washington
think tank, “The agency will run out of cash and rack up a $78-billion
deficit in 16 years.” A domino effect is inevitable. Already, competing
airlines and other sections of corporate America are eliminating their pension
liabilities. A PBGC crash may come sooner than later.
UAL workers and
retirees have been illegally dragged into the cesspool of PBGC debt. Their
pension plans have been in place for decades under contracts that are still
enforceable. They were broken when the bankruptcy judge awarded PBGC a bonanza
valued at $1.5 billion—$1 billion in notes and $500 million in preferred
stock—to take over UAL’s huge pension liabilities.
The PBGC
is normally an unsecured cre ditor in bankruptcy court. The agency estimates the
average recovery at just seven cents for every dollar of underfunding in a
failed pension fund. They are all violating the Employment Retirement Income
Security Act (ERISA), passed in 1974, which guaranteed an earned defined-benefit
pension.
Corporations are required to set aside funds to pay these
pensions. When they default, ERISA guarantees a grievance and appeals process to
fight violations.
The union lawyers are well aware of this illegal and
underhanded deal carried out behind the backs of the hundred of thousands of
employees and retirees. Word going around is that the lawyers are going to
appeal the court’s illegal decision. AFA/CWA members are prepared to
support it with CHAOS.
According to CHAOS coordinators, “CHAOS is a
strategic and coordinated campaign designed for maximum impact ... . We will not
announce CHAOS strikes prior to their implementation. ... CHAOS is a strategy of
intermittent strikes that could take the form of a nationwide strike for a day
or a week, a single city for an afternoon or a single flight at a remote
location.”
The coordinators also confirmed that “Flight
attendants at 26 airlines represented by AFA have pledged to support a CHAOS
strike action in the event any Flight Attendants Contract is unilaterally
changed.”
This past December, the AFA/CWA organized a march on
Washington. Large contingents from other airlines attended. Members of the
International Longshore and Warehouse Union and others joined the march. When
the rally ended, they marched to the White House chanting “CHAOS!
CHAOS!”
UAL mechanics are represented by an independent union. The
International Association of Machinists (IAM) represents ramp workers,
reservation clerks and other top-side service workers. If these two unions,
which are supporting the flight attendants, engage in a strike or job action,
they will get widespread sympathy.
AFA/CWA Council 5 flight attendants and
supporters have already staged motor cades educating members and passengers at
New York’s Kennedy airport about CHAOS. They are winning public support as
they picket, leaflet and rally on the 1st and 16th of each month to protest the
UAL attacks on their jobs, wages and pensions.
They are exposing Glen F.
Tilton, UAL chief executive, and his high-priced cronies, who found a way to
save their pen sions, bloated bonuses, salaries and guaranteed stock options.
They want Tilton, a former Texaco CEO, to resign. He has mismanaged the
second-largest airline in the country. UAL has lost billions since it filed for
bankruptcy in December 2002.
In September 2004, the AFA/CWA joined the IAM
in a motion filed earlier in bankruptcy court to appoint a new trustee, a move
that would unseat Tilton. After UAL filed for Chapter 11 bankruptcy in December
2002, the company could no longer claim ownership. It had to surrender the title
and legally became a debtor.
However, it was granted possession of the
airline’s assets by the bankruptcy judge, who appointed a UAL puppet to be
trustee and run the airline. One of the first orders of the court, to be sure,
was to guarantee these obscene and lucrative benefits to the entire UAL
management.
Two of the UAL unions sit on a powerful creditors’
committee. They have the right to overturn the trustee’s decision. But the
unions are a minority and are outvoted by powerful forces that represent banks
like Citigroup and J.P. Morgan Chase, who are bankrolling UAL with
debtor-in-possession loans. They and the vendors who lease planes to UAL get top
billing.
Clearly the tens of thousands of UAL union members should lay
claim to ownership and workers’ control. They are the principal creditors.
They fought to accumulate the equity that is now being stolen from them. They
built the company with their experience, skills and sacrifices. What they gave
up in lost wages ($2.4 billion), pensions ($9.8 billion), and other benefits
should make them the primary creditor to assert their rights to run the company.
CHAOS and the combined power of the labor movement, which has a huge
stake in the pension crisis, can make this a reality. It will take a general
strike—even if just for a day. This may sound daring and far out. But so
was the idea of organizing unions in the 1800s, and occupying plants and
organizing general strikes in the 1930s.
The UAL unions are on the firing
line. They are preparing their members for a fightback against a conspiracy
orchestrated by the government, its agencies and the billionaire tycoons of
corporate America.
It will take an independent, class-wide
movement—a development that is alien to a labor bureaucracy in
disarray—to turn back an unprecedented, relentless economic assault
against the workers and the oppressed. Meanwhile the White House, Congress and
both capitalist parties can agree to divert hundreds of billions to finance
endless wars and occupations.
The airline workers can be the spark to
fire up the labor movement. It’s long overdue.
Articles copyright 1995-2012 Workers World.
Verbatim copying and distribution of this entire article is permitted in any medium without royalty provided this notice is preserved.
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