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‘Shared Sacrifice’: Hostess Used Employee Pensions to Fund Itself
See if you can spy the “shared sacrifice” in this story.
While paying millions to its executives, Hostess took the money that was supposed to go into employees’ pensions and used it for other things.
Hostess just went bankrupt and got a judge to allow them to pay $1.75 million in bonuses to 19 of their executives. Yet… It turns out that Hostess took the money that was supposed to go into employees’ pensions and used it for other things. They say they spent it on company operations, but court records show them asking for permission to pay their CEO and other executives a lot of money.
Yahoo reported:
Hostess hasn’t previously acknowledged that the foregone wages went toward its operations.
The maneuver probably doesn’t violate federal law because the money Hostess failed to put into the pension didn’t come directly from employees, experts said.
“It’s what lawyers call betrayal without remedy,” said James P. Baker, a partner at Baker & McKenzie LLP who specializes in employee benefits and isn’t involved in the Hostess case. “It’s sad, but that stuff does happen, unfortunately.”
The main baker pension fund alone is missing $22.1 million. Because the money didn’t come directly from employees, it may not technically be illegal (theft), even though the employees agreed to have a certain part of their wages turned into pension funds by the employer. See, it’s not just the employer contribution, but also employee wages earmarked for the pension fund. Wages.
In February, Hostess asked the bankruptcy judge to approve a base annual salary of $1.5 million, plus cash incentives and “long-term incentive” compensation of up to $2 million for its then chief executive. Furthermore:
If Hostess liquidated or Driscoll were fired without cause, he’d still get severance pay of $1.95 million as long as he honored a noncompete agreement.
Shared sacrifices?
Even as Hostess blamed the unions, creditors accused Hostess of manipulating executive salaries in an attempt to get around bankruptcy laws, with then-chief executive Brian Driscoll’s salary going to $2.55 million from around $750,000 while “other executives’ salaries were increased by from 35% to 80%.”
It’s hard to see how this is not embezzlement, but apparently this happens so often that award-winning investigative reporter for the Wall Street Journal Ellen Schultz wrote a book about it called “Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers.”
“Schultz uncovers decades of widespread deception during which employers have exaggerated their retiree burdens while lobbying for government handouts, secretly cutting pensions, tricking employees, and misleading shareholders. She reveals how companies: Siphon billions of dollars from their pension plans to finance downsizings and sell the assets in merger deals (and) Overstate the burden of rank-and-file retiree obligations to justify benefits cuts while simultaneously using the savings to inflate executive pay and pensions.”
I don’t see any shared sacrifice. I see the workers sacrificing, or rather, sacrificing while unknowingly being robbed at the same time by the CEOs.
But the CEOs get theirs and then some. They got rewarded for bankruptcy. No one took their salaries away; in fact, their salaries were increased.
Mitt Romney was just the poster boy for what’s wrong with corporate America. The theft from the people continues unabated, this time from Twinkies, Ho-Hos and Wonder Bread.
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50 Responses to ‘Shared Sacrifice’: Hostess Used Employee Pensions to Fund Itself
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todd
Dec. 11th, 2012 at 8:10 am
These CEOs, these so called Captains of Industry. What happened to captains going down with their ships? These guys act more like a bunch of rats jumping ship.
Declan Vorbarra
Dec. 11th, 2012 at 6:16 pm
You may not agree with the logic, but it is fairly sound…
When a company is in bankruptcy the smart executives will bail and hire on somewhere else as quickly as possible. This is a basic trait of human nature, and not only executives do this.
So, to keep the executives there and motivated, the bankruptcy court puts “golden handcuffs” on them. Without this incentive, the company would struggle in chaos and have no chance of survival.
Seriously, people need to do some research and gain a basic understanding…
unemployed
Dec. 12th, 2012 at 1:08 pm
You must be Mrs. Rayburn. I may not have a job any more but I still have my respect. union born, union raised, and I will die union
Reynardine
Dec. 11th, 2012 at 8:11 am
Hostess was probably kept afloat into the Twenty-First Century just so the Bush administration could colorably be telling the truth when they said Iraqi agents were buying yellowcake.
Sandra
Dec. 11th, 2012 at 6:37 pm
Good one!! F&F!!!
djchefron
Dec. 11th, 2012 at 8:23 am
You want to be thief?Don’t get a gun get a MBA.Its a bigger haul and if and that’s a humongous if you get caught chances of going to jail is slim to none and none has left for the Cayman Islands.
ParanoidAndroid
Dec. 11th, 2012 at 11:22 pm
Check your facts. Driscoll doesn’t have an MBA. Maybe if he did, this wouldn’t have happened.
djchefron
Dec. 12th, 2012 at 7:14 am
So whats your point?
buckeyewill
Dec. 11th, 2012 at 8:36 am
Did these guys graduated from the Ayn Rand School of Business???
If so, they act like TAKERS instead of GIVERS.
A Walkaway
Dec. 11th, 2012 at 10:44 am
They’re the true face of Ayn Rand and conservatives. I just wish that the rest of the people, especially the “Good Christian” sheeple would see this.
J. C.
Dec. 11th, 2012 at 11:34 am
What the….?
What is the deal with all of the negative Ayn Rand quotes? I can tell from the comments that you’ve either never read her books or you’re too stupid to understand them. She does promote doing things only for yourself, but stealing from other people does not fall under that category because it relies on having other people to steal from; there is nothing self-actualizing about feeling the need to steal from other people. That isn’t working for what you want. If the executives and owners of Hostess were adhering to Ayn Rand’s philosophy, they would love their job and try to keep the company up as long as possible, regardless of bankrupting themselves. Two of the main characters (the ones epitomizing her philosophy) in The Fountainhead actually DO bankrupt themselves AND always pay their employees until they are forced to let them go. That and Atlas Shrugged are her two main proponents advocating her theory, and you’ve obviously read neither.
That is the problem with the world right now; too many idiots taking too many shortcuts. You probably read like a paragraph that tried to paraphrase Ayn Rand’s work. Read a damn book! It isn’t difficult.
A Walkaway
Dec. 11th, 2012 at 1:12 pm
I’ve read Ayn Rand, and she’s full of shit. I wish I hadn’t wasted the time (back when I was a kid).
BTW… I read the equivalent of 2-4 books a week, but not outdated, worthless crap like she writes. I read scientific research journal articles (and to tell the truth, I should be reading even more to keep up with the latest research, but I only have so many hours in a day).
A Walkaway
Dec. 11th, 2012 at 2:01 pm
Correction – She WROTE. She’s dead.
A Walkaway
Dec. 11th, 2012 at 1:21 pm
Oh, and you should learn about how your precious Ayn Rand acted when she learned she was dying. She proved her rabid hypocrisy by becoming a “taker”. She went on the dole.
Do something YOU should be doing – reading non-fiction, and learn the truth about her and what she really stood for.
Or do you understand the difference between fiction and non-fiction?
A Throwaway
Dec. 11th, 2012 at 3:54 pm
“It is obvious, in such cases, that a man receives his own money which was taken from him by force, directly and specifically, without his consent, against his own choice. Those who advocated such laws are morally guilty, since they assumed the “right” to force employers and unwilling co-workers. But the victims, who opposed such laws, have a clear right to any refund of their own money—and they would not advance the cause of freedom if they left their money, unclaimed, for the benefit of the welfare-state administration.”
“…and they would not advance the cause of freedom if they left their money, unclaimed…”
You work, day in day out. That is your time, your blood, your sweat, and your tears that are shed. The government is supposed to represent ‘the people’, and so, the people around you think you are ‘obligated’ to give some of your earnings to them… for the greater good. What she ‘took’, she was forced to give. If you want to call her a taker, you cannot do so without calling her a giver. This is the case with everyone. It is your prerogative to request this money back, but it should be that it is your prerogative to give this money away in the first place, and it is not.
We do not all have the same moral values as one another. We should not force our own morals on others, nor be subjected to the morals of others being forced upon ourselves.
When your time comes, you’re welcome to not take back what you have been forced to give, but do not think that not taking what was yours to begin with, will send any kind of message to our representatives to respect our liberties.
A Walkaway
Dec. 11th, 2012 at 8:02 pm
Taxes are a part of life, and necessary. When people like those 19 take money from the working people, it goes only to help themselves. Taxes, on the other hand, help others, except when the elites get their fingers into the pie (and take it all for themselves – think ALEC).
Without taxes we wouldn’t have highways. Hospitals. Bridges. Shoot, even electric power for most of the country. No libraries, not much of anything.
Certainly no freedom. It takes tax money to run an army and there have been countries that would love to take over the US if they could (but we don’t need to spend more than the rest of the nations COMBINED on the US military!).
Without taxes we would be living in anarchy – and that’s something only an idiotic fool would wish (or they’re a violent bully at heart and want to shove others around).
Ayn and crap like her forget that we’re all interconnected and interdependent. No man is an island is something that she should have put on a big sign and put it where she could see it every day. It’s a truth. Plus she also forgot (conveniently) that people are responsible for the harm they do to others, and that they are RESPONSIBLE TO OTHERS.
Ayn Rand is gone, and good riddance. Her bullshit needs to die with her.
Reynardine
Dec. 11th, 2012 at 1:41 pm
In fact, Ayn Rand’s niece, a lovely lady whom my sister knew personally, was sometimes invited to give speeches by rapt Randians, whom she then shocked by telling them Auntie Ayn was smack nuts.
Auntie Ayn was so smack nuts she adulated the murderer of Marion Parker, while utterly contemning his tortured and dismembered twelve-year-old victim, her bereaved and outraged family, and her community, as a collective of weaklings out to bring down a superior man. That is whom you admired, whom Milton Friedman admired, and whom Paul Ryan wishes to emulate.
A Walkaway
Dec. 11th, 2012 at 11:14 pm
I think we angered some trolls.
Maybe they’ll start thinking instead of venting, and realize that their heroine is actually a monster.
Louis J Ham
Dec. 11th, 2012 at 3:35 pm
Ayn Rands greatest legacy is giving voice to the overpriveledged, and inviting them to embrace their inner douchebags.
Wuzzi
Dec. 12th, 2012 at 2:12 pm
Amen. I can’t understand how Christians can condone such terrible breaches of ethics. Just because someone had a judge in their pocket years ago to rule that raiding pension funds is technically ‘legal,’ thus setting precedent for every other greedy jerk in the world to make themselves rich at the detriment of hundreds even thousands of others does not make it RIGHT. I tried so hard this election to explain to Christian conservatives I know and love that it is really obvious that the Republican party uses one thing (Roe v Wade) to capture the Christian right, regardless of their income level, and get them to vote against their own self-interest. They are so blinded to that, though, when they hear from their pulpit several times a year about how we have to stop abortion at all costs and it is the most evil sin in the world that they cannot bring themselves to even consider other Christian virtues that are obviously ignored entirely by Republican leadership (serving the poor,elderly, widow, orphan and struggling, for starters).
I had many people quit speaking to me and a family member wrote a terrible post on my wall (the only thing they have ever said to me on FB). Just… so sad.
Brigita Petrutis
Dec. 11th, 2012 at 9:26 am
This pirating, self-cannibalizing behavior must find controls — just because it “looks” like capitalism doesn’t make it so. Just as addicts will stop at nothing to satisfy their craving, without intervention, so will these malevolent psychopathic megalomaniacal “captains of industry” destroy everything around them.
A Walkaway
Dec. 11th, 2012 at 10:49 am
It’s the same thing that happened leading up to the “Great Depression”, and I would argue that the US was in another depression and still is in many ways.
The working people aren’t seeing better lives.
The corporations are screaming that they can’t get people to work for them, but they also have admitted it was because people refused to work for them for the wages they offered (whatever happened to “self-correcting market” you bastards?).
I just read this morning that companies are seeking employees again, but cannot get people to sign up because they won’t work for slave wages – the goal of this supposed “recession” in the first place (that and the super-rich were trying to take out the less-than-super-rich).
Colleen
Dec. 11th, 2012 at 9:43 am
Then they have the nerve to blames it on the “greed” of the union whose members took cuts already and were asked to take more while these CEOs plundered their pension fund. Now all these people are out of work and 19 fat cats have millions.
be funk note
Dec. 11th, 2012 at 10:10 am
This is sickening. Why aren’t we rioting in the streets?? We are literally being robbed by these people every day. They are limiting our potential and making a whole generation of people jaded. The system is rigged and there are no opportunities anymore.
I am so sad for our country.
Eric Arezzo
Dec. 11th, 2012 at 10:16 am
I can think of a remedy. It’s called direct action. Find the people who got the bonus outside of a court room.
A Walkaway
Dec. 11th, 2012 at 10:53 am
While my gut agrees, at the same time the rich and powerful will use EVEN YOUR STATEMENT against us. Unfortunately, we don’t really even have freedom of speech any more.
If anyone tries to balance the books, so to speak, you can bet that the Republicans and their cronies will crack down on the rest of us… even if we weren’t part of any, shall we say, physical activity.
The Democrats in congress need to grow some balls, and crack down on the rich – BIG TIME.
(Regulation is necessary when it comes to corporations and the rich. The power their wealth generates must be forced to work for all people rather than just for them.)
Marcus
Dec. 11th, 2012 at 11:07 am
Eric, I agree with you, these unscrupulous people have the government and legal systems tied down with their money.
We common folk have to make being rich ‘uncool’. Not many people drive hummers nowadays because people treat them as douchebags. If we all treat rich people with a healthy dose of scorn it will start to effect them. (After all they usually get rich for the superiority and gratification)
Call out those rich people and they’ll eventually cave to pressure and start spreading their wealth not to be victimized.
Sandra
Dec. 11th, 2012 at 6:57 pm
I don’t know if that will work, they were already whining during the last election, that they were the victims. This kind of corporate theft should not go unpunished though, laws have to be implemented retroactively to take back what they stole, and treat their behaviour as a criminal offense. Time to get tough and bring back fairness in the workplace.
Reality Awareness
Dec. 11th, 2012 at 11:51 am
18,500 workers vs 19. The article is obviously labor focused and part of the unions attempt to shrug their own responsibility. Want to bet union dues were
more than the actual skilled workers received in final payouts?
The workers have no unique skills and should have been thankful to have HAD a job. Now their bloated greed can join their co-union workers in the unemployment line. Hostess taught them the skills they have; i am sure they can get a job at the next bakery. No?
Not enough pay/benefits? Too bad!!!
Now go work the donut shop at the corner and learn how people actually work without a union protecting their useless greedy asses.
Shiva (Moderator)
Dec. 11th, 2012 at 12:23 pm
you have never paid union dues have you.
Just another cliche post.
sandie
Dec. 11th, 2012 at 12:47 pm
after giving back 8% several years ago… then having their pensions raided. i do not blame the bakers for not negotiating another pay and benefit reduction… while paying management more. they will be no worse off…. i hope.
Ugh
Dec. 11th, 2012 at 12:57 pm
Bad troll is bad. Union dues? what the hell are you talking about? How does that equate to setting aside your wages for a pension plan, and then having the executives of the company just keeping your money. If union workers have a problem with how their dues are being spent, they have recourse. Evidently, for pensions, they don’t. I offer you my pity sir. Somewhere along the way you have lost your soul. You have decided that human life is cheap. How many of your fellow humans need to be chewed up so that the 19 can have a 4th car, or a 3rd house, or a bigger boat?
Reynardine
Dec. 11th, 2012 at 10:25 pm
Exactly whose burro are you telling to mow the lawn? There is no visible antecedent for your rant. Take three Ibuprofen, lay off the sauce, and if a quart of coffe doesn’t set you straight in the morning, go see the doctor.
Reynardine
Dec. 13th, 2012 at 8:08 am
Pertains to someone whose comment was taken down.
voiceofreason
Dec. 11th, 2012 at 12:23 pm
What I do not understand about these types of situations is how this is not covered under the legal definition of fraud and why the perpetrators are not subsequently prosecuted. Can anyone explain to me why this is not fraud? If I contracted to pay someone matching funds into some trust fund and then did not, I am sure that I would be prosecuted, be forced to offer restitution, and probably do jail time.
sandie
Dec. 11th, 2012 at 12:28 pm
capitalism at it’s best.
A Walkaway
Dec. 11th, 2012 at 1:14 pm
“Ayn Rand” capitalism at it’s best.
Sicwithno Kure
Dec. 11th, 2012 at 1:03 pm
This what happened 100 years ago, no different today. People have to say something instead of lying on the couch. Soon you will lose your couch too!
voiceofreason
Dec. 11th, 2012 at 2:20 pm
Those of you who are ranting against capitalism, “Ayn Rand” capitalism, or rich people are missing the main point here. This is about accountability, responsibility, and good citizenship. Corporations and corporate officers should be held accountable to the same rules of law that the rest of us are. The law does provide some limited liability protection to corporation owners and employees (including the executive officers), but if the corporation or an employee commits fraud or breaches a contract, that limited liability protection is not supposed to apply. So my question remains, why are the corporation and the executives who made the decision to withhold the money from the pension fund (as well as those who confirmed that decision) not being prosecuted, sued, or otherwise held accountable? This is the real question that everyone should be asking their state and federal representatives and demanding answers.
A Walkaway
Dec. 11th, 2012 at 3:37 pm
Why? Because they’re the “Job Creators”, don’t you know?
(Historically, the rich have always gotten away with things that might get the rest of us killed or at least spend most of our lives in prison.)
djchefron
Dec. 11th, 2012 at 4:01 pm
Just to piggy back on the non consequences for the rich
HSBC to Pay $1.92 Billion to Settle Charges of Money Laundering
dealbook.nytimes.com/2012...
ParanoidAndroid
Dec. 11th, 2012 at 11:39 pm
Maybe because what they did is not illegal. And maybe because of the rabble rousing story written here. And maybe because no one on here understands how corporate pension funds operate or the laws governing them.
I find it humorous that people here think the workers somehow deserve whatever was taken out of the fund (they don’t) and the executives don’t (they don’t either). There is a lot of blame to go around within this Hostess case. In all honesty, they should have withdrew the money from the pension fund to pay the creditors. They are the only ones who got screwed. Both the workers and the executives got greedy. The creditors just lent them money to keep the business afloat – but neither the executives nor workers did what they were obliged to do. They were just both looking after their own selfish interests.
Yeah, sometimes labor can be evil too. We all know that executives exhibit this problem all too often.
Shiva (Moderator)
Dec. 12th, 2012 at 12:31 am
The money came from the workers pay checks. hello?
Wuzzi
Dec. 12th, 2012 at 2:18 pm
It is because there was a time when someone went to court because they were struggling financially and asked if it would be okay if they used the pension fund money to fund other things. The court OK’d it, so now it is a precedent of law – pension funds are owned by the employer, not the employees.
I read someone somewhere who posted the technical term for it – it is a growing problem and what is happening is corporations everywhere are shrugging their responsibility to their employees and leaving the government’s pension guaranty to pay their retirees a small percentage of what they would have gotten if the pensions had stayed funded, declaring bankruptcy and giving themselves large bonuses and payouts as the destroy the company with the excuse that “corporate officers won’t stick around a dying company to finish it unless they are paid more than regularly.” SMH
Colin
Dec. 11th, 2012 at 3:01 pm
Hostess are the Ho’s going ho-ho-ho, and the workers ended up being the Twinkies and Ding-dongs…
Thinking Person
Dec. 11th, 2012 at 3:27 pm
So, the legal system has become a pawn in the corporate structure. Geez, the ALEC’s of the world have found a way to even prostitute our legal system.
What, what and what?
Corporation steals – Corporate PERSON mind you – and nothing happens??!!! Come on. This is OUTRAGEOUS.
So, the courts give a LICENSE to corporate people to steal.
Well, yes, this is why the country is economically and morally bankrupt. The people PAID to protect us, to dispense fairness and justice, couldn’t find it if it was sitting right before it.
My anger at the corruption of every aspect of our system is growing. All our checks and balances are corrupted.
Gee, what’s next? I’m embarrassed for our finest educational institutions. Robots came out who can’t even defend the U.S. Constitution.
Enzo
Dec. 11th, 2012 at 7:33 pm
How could they borrow against a pension fund unless the union agreed to it? Typically the union runs the pension fund. Something isn’t right here.
Jeff
Dec. 23rd, 2012 at 3:12 am
Thats just it, they DID NOT ASK to “borrow against” the pension fund, the money never MADE it there. The payroll deductions earmarked for the employer’s contractual obligation to the pension funds never MADE it to the funds, they simply pulled the money from the company’s finances, as they needed to so they could get the necessary tax writeoffs, then put the money back into the operational funds instead of sending it to the appropriate unions to be placed into the appropriate MEPPS.
notsoanon
Dec. 11th, 2012 at 8:34 pm
I’m surprised people hasn’t taken justice in their own hands yet. The more news like this you read the more obvious it is that it’s well planned, systematic and a common practice.
Inez
Dec. 11th, 2012 at 9:53 pm
Where does grand theft enter the picture? The wealthy will do anything to keep the little guy from SURVIVING! Who is responsible for record keeping and when does the auditor know what they did by stealing the pension funds? Hope they are treated like the criminals they are.