Bernie Madoff soaks up all the attention, but there are other pension managers out there squandering their clients’ money — and getting away with it.
Want to know why President Obama isn’t excoriating these other greedy, irresponsible pension overseers?
Because they’re his chums at the SEIU and ACORN (see also Chapters 7 and 8 of Culture of Corruption).
The WSJ shines light on union pension scandals no one’s talking about:
We’ve all read about underfunded corporate pensions, but here’s an unreported story: Union pensions are even more in the red, and it’s one reason union chiefs are so eager to rig organizing rules to gain more dues-paying members.
Only last week, the country’s largest union local re-opened the contract for its 145,000 members two years early and gave up raises and reduced retirement benefits for future hires. The SEIU’s United Healthcare Workers East struck this unusual deal so employers could instead plug a gaping pension hole.
In April, the SEIU National Industry Pension Fund—which covers some 101,000 rank-and-file members—announced that its pension has been put into what the feds call “critical status,” or “red zone.” In other words, it lacks the cash to pay promised benefits and may have to cut them. As of 2007, the last year for which it reported results to the government, the fund had 74.4% of the assets needed to pay its benefits.
Rank-and-file members are taking big hits. The brass? Not so much:
For example, Unite HERE’s National Retirement Fund stood at 115% in 1998 and dropped to 83.4% by 2007, well before the crash. The SEIU fund that was put into a “red zone” in April was at 103.4% as recently as 1998. On average, the asset to liability ration at so-called multi-employer plans, which union funds make up the bulk of, stood at 66% in 2006, according to the Pension Benefit Guaranty Corporation. By contrast, single employer plans, basically most company-provided pensions, were funded at 96%.
Poor management probably deserves a lot of the blame for the union decline, but the exact causes are a mystery. An even bigger mystery is that the unions do a far better job with funds created for their officers and employees than for mere workers. The SEIU Affiliates, Officers and Employees Pension Plan—which covers the staff and bosses at its locals—was funded as of 2007 at 102.2%. The plan for the folks at SEIU international headquarters was funded at 84.8%.
Union officer benefits are also far more generous than anything dues-paying workers enjoy.
There’s no mystery about pension and health fund mismanagement at ACORN. It was plundered to cover for corrupt leaders. The House GOP report released last week lays it out:
ACORN violated its fiduciary responsibilities under the Employee Retirement Income Security Act of 1974 (“ERISA”), which protects the benefit rights of employees. Stephanie Strom, in an October 22, 2008 report in the New York Times, stated ACORN Fund, a health care benefits fund, “had advanced ‘a large amount of money’” to ACORN and “it appeared that the money was used to cover ‘the cash shortfall caused by the embezzlement.’”
The June 19, 2008 HCSE Memo identified ACORN’s current pension fund as “Council Beneficial Association, or CBA” and its health plan as “Council Health Plan, or CHP.”131 The memo stated:
Two other revelations need to be further investigated. These pertain to ACORN Beneficial Association, or ABA, a discretionary plan in place before the creation of CBA that was intended not to be a true pension fund covered by the ERISA law, and to ACORN Fund, a similar discretionary health care fund that was in place before the creation [of] CHP. A large part of the embezzled funds ($215,000) were charged through ACORN’s AmEx account to ABA. When the theft was discovered, this meant that Dale owed ACORN this amount, and ACORN in turn owed ABA for the overpayment. [We are] told that ABA decided to write this debt off as a gift to ACORN (though the debt from Dale naturally was not forgiven). Although it is the organizations’ legal position that this fund was not covered by ERISA and therefore not subject to its rules that would prohibit this sort of gift, it is nonetheless the case that a number of organizations, possibly including unions and charities, paid funds into ABA for entirely different purposes. They did not make those contributions in order to make a gift to ACORN. [We] have not gotten information about who authorized this decision, but those questions need to be asked. Either the board was involved in the decision and can explain the rationale, or they were not, and there are serious questions to ask as to who authorized this expenditure.
Congress has a role in asking those questions too, because of the millions in taxpayer subsidies that flow into the coffers of ACORN and its affiliates.
And where’s the White House? So quick to bash Wall Street greed, the garrulous President Obama has nothing to say about the SEIU and ACORN pension fund scandals.
His silence speaks volumes.