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You be the judge: Is Renco robbing steelworker pensions?

by Milt Neidenberg Saturday, Feb. 25, 2006 at 11:01 AM
ww@workers.org

The Renco Group, Inc., is threatening legal action against Workers World newspaper. Its owner is Ira C. Rennert, a billion aire speculator who deals in selling and buying companies, many in bankruptcy. Rennert is one of a growing breed of predators feeding off distressed companies.

You be the judge
Is Renco robbing steelworker pensions?
By Milt Neidenberg
Published Feb 23, 2006 12:10 AM
http://www.workers.org/2006/us/renco-0302/

The Renco Group, Inc., is threatening legal action against Workers World newspaper. Its owner is Ira C. Rennert, a billion aire speculator who deals in selling and buying companies, many in bankruptcy. Rennert is one of a growing breed of predators feeding off distressed companies.

They suck out the assetspensions and other equities built up by the sweat and blood of the workersand dump them when it is most profitable. Rennert has built an empire of massive holdings in real estate, mining and metal industries, including one in Peru.

One of his buyouts was WCI Steel, a plant of some 2,200 workers and retirees in Warren, Ohio, on the edge of the Rust Belt. Renco Group bought out bankrupt WCI in 1988. Following an unsuccessful attempt to break the steelworkers union there in a bitter strike in 1995, Rennert agreed to create a new pension plan, the old plan having been wiped out in the previous bankruptcy.

It was a short-lived victory for the steelworkers. WCI again declared Chapter 11 bankruptcy in September 2003. Accord ing to the Ohio Beacon Journal of Feb. 7, The pension fund of WCI Steel Inc. is about $117 million short of its obligations.

Renco has retained Arnold & Porter LLP, a global powerhouse of 650 lawyers with legions of powerful Fortune 500 clients. A letter from the firm claims a Feb. 14 WW article about Renco was false and defamatory. Headlined, WCI steel bankruptcy robs workers pensions, the WW article backs up the claim that after robbing the pension fund, Renco now claims it can cover the funds shortfall.

According to the letter from Arnold & Porter, Renco never robbed the pension fund and WW must withdraw the current version of the article from its website and should not reprint it in any future issue of the print edition.... It demands that WW apologize to the Renco Group and its officers, directors, employees and shareholders or face legal action.

WW editor Deirdre Griswold says, The paper is standing by the article unconditionally and refuses to accept Arnold & Porters ultimatum. The article accurately described their client as robbing the pension funds.

Robbing pension funds comes in different forms and Renco is no exception.

According to the Pension Benefit Guarantee Corp. (PBGC), a government agency tasked with protecting workers pensions, the Employment Retirement Income Security Act of 1974 guarantees that companies that make pension promises are obligated to pay for those pension promises. The PBGC filed a lawsuit to seize the pension plan of the bankrupt WCI Steel, saying that the plan was more than $100 million short of the amount needed and that the government believed WCIs corporate parent, the Renco Group, should be held responsible for the money. ... The steelworkers could risk losing about $23 million worth of benefits. (New York Times, Feb. 3) In plain words, the company had robbed the pension fund.

The facts are indisputable. Renco has now admitted to the bankruptcy court that WCIs corporate family had the means to make the pension plan whole. The Renco Group, its attorneys acknowledged, has enough money to cover the pension obligations. (Ohio Beacon Journal, Feb. 7)

Capitalist vultures at war

Currently a bitter struggle is going on between Renco and a group of Wall Street financiers over ownership and who is responsible for the $117 million under-funded pension liability. These secured creditors, who financed the company during the bankruptcy, have created a shell company. If they win ownership, they will demand that the $100 million currently in the pension fund be transferred to their company.

These bankers could win the ownership and the pension fund, and Renco could lose the company. Billionaire speculator Rennert would be held liable for the $117 million obligation and stand to lose a bundle.

The stakes are substantial. Is this why Workers World, which unraveled this tangled tale, is now being threatened?

Nevertheless, one fact stands out beyond dispute. The pension funds are the legal property of the steelworkers, who worked hard and long in a dangerous and difficult environment to secure a measure of security for their senior years.

Symptom of huge pension crisis

The giant wave of cutbacks, freezing and defaulting on pension contributions by U.S. corporations is a disaster of monu mental proportions. Currently, the shortfall in pension plans is estimated to add up to around $450 billion in the private sector and around $300 billion in the public sector.

The Employee Benefit Research Insti tute, a nonprofit organization, says 42.4 percent of workers in the private sector over the age of 21 lack any retirement coverage. It calculates that over 48 million workers, or 45 percent of the workforce, have no pension benefit or retirement savings plan.

IBM announced last month that it plans to freeze its pension fund covering 125,000 workers in 2008. Alcoa, NCR, Verizon, Hewlett-Packard, Motorola and Sears have set up their own plans to deal with their underfunded pensions. Many are converting them to 401-k savings plans, which are speculative at best and a risky nest egg for workers reaching retirement age.

Bankruptcies are in vogue. The pension crisis accompanying the WCI bankruptcy is only the tip of the iceberg. About 150 corporations are in some stage of bankruptcy reorganization. United Airlines, Delta, Northwest and Bethlehem Steel have used the bankruptcy court to dump their pension obligations.

The surge in bankruptcies comes at a time when Wall Street and corporate America are boasting about capitalist expansion and growth. What will happen when the capitalist economy slows down? How many more companies will file for bankruptcy, lay off the workforce and end their legacy costs, such as pensions and health benefits?

The global auto parts giant Delphi is a special case. If the bankruptcy court allows this company to terminate its pension liability, that would amount to a default worth between $45 billion and $50 billion, according to the PBGC. This government agency is now underfunded by $23.3 billion because of previous bankruptcies and can provide only a dwindling percentage of the defined pension benefits that workers should be entitled to.

Bankruptcy and workers control: an idea whose time has come

In bankruptcies, ownership is up for grabs. When a company files for bankruptcy, it is no longer the legal owner. It surrenders the title. The company becomes a debtor no longer in possession of the property. It is vulnerable to creditors, particularly the multinational rank-and-file organized workforce, who have equitytheir pensions and other contractual benefits. This entitles them to be the principal creditors of the distressed companies. They create the value through their labor power that keeps the operations running. Just such a struggle is going on in Delphi.

The United Auto Workers must prepare for battle as representatives of the Delphi workers. Delphi has money$1.6 billion in cashbut Citigroup and JPMorgan Chase, as the debtor in possession lenders, will claim this money after the PBGC absorbs the pension default. Representing the Delphi workers, the union must assert its right to be the trustee to run the company and therefore the de facto owner on behalf of the workers. Taking possession of the plant and equipment has to be planned and organized to assure the contracts are honored and pensions, health care and jobs are secured.

It must be explained over and over that occupation is a legal right, but a right that will only be recognized through struggle. Thats the way it was done in the 1930s, when General Motors workers took over the plants in the famed sit-ins and the UAW was born.

Pensions, health care and jobs are a property right. Only under workers control can they be guaranteed. Thats the lesson of the WCI/Renco struggle.

This article is copyright under a Creative Commons License.
Workers World, 55 W. 17 St., NY, NY 10011
Email: ww@workers.org
Subscribe wwnews-subscribe@workersworld.net
Support independent news http://www.workers.org/orders/donate.php
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