After Chapter 11, PBGC Assumes Responsibility for Chicago Sun-Times Pensions

After the Sun-Times and its units filed for bankruptcy protection in March 2009, the company sold nearly all of its assets -- PBGC has stepped in to assume responsibility.

(August 16, 2010) — The Pension Benefit Guaranty Corporation (PBGC) has assumed responsibility for seven pension plans covering nearly 2,360 workers and retirees of the Chicago Sun-Times newspaper group, which suffered a severe drop in advertising revenue largely brought on by decreasing ad buys from the automotive and housing sectors, as well as a concurrent drop in companies’ posting employment opportunities.

According to PBGC, the seven plans are 54% funded, with $55.8 million in assets to cover $106.5 million in benefit liabilities. The firm expects to be responsible for $49.1 million of the $50.7 million shortfall. PBGC assumed action because the company sold its assets in bankruptcy proceedings and the buyer failed to assume the plans.

PBGC, which assumed responsibility for the plans on August 4, will take over the assets and use insurance funds to pay guaranteed benefits earned under the plans, which ended October 8, 2009. Retirees will continue to receive their uninterrupted monthly benefit payments, while workers will get their pensions when they are eligible for retirement.

The plans are:

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Chicago Sun-Times Office Employees’ Pension Plan
Chicago Sun-Times Guild Employees’ Pension Plan
1986 Chicago Sun-Times Pension Plan
Pioneer Newspapers Inc. Retirement Income Plan
Retirement Plan for Bargaining Employees of Daily Southtown Inc.
Retirement Plan for Employees of Star Publications Inc.
Pension Plan for Salaried Employees of Holladay-Tyler Printing Corporation

The PBGC guarantees payment of basic pension benefits earned by 44 million American workers and retirees participating in over 29,000 private-sector defined benefit pension plans, the group said. The agency receives no funds from general tax revenues, and operations are financed largely by insurance premiums paid by companies that sponsor pension plans and by investment returns.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

Massachusetts Pension Sues HP, Former CEO Mark Hurd

The $300 million pension has sued Hewlett-Packard and its former Chief Executive Mark Hurd, who was ousted from the company after a sexual-harassment-claim settlement, seeking a variety of governance changes and punitive damages for breach of fiduciary duty, mismanagement and waste of corporate assets, including the severance payment to Hurd.

(August 16, 2010) — One of the largest retirement systems in Massachusetts has sued Hewlett-Packard Co.’s directors, claiming the group violated their fiduciary duties in connection to the departure of Chief Executive Mark Hurd that caused the company’s shares to drop significantly.

“We have close to $700,000 invested in HP,” Harold Hanna, executive director of the Brockton Retirement System, confirmed with ai5000 Monday morning. He said the Connecticut-based law firm Scott + Scott LLP, representing the pension fund, has been monitoring the case and urged action. “There was fraudulent handling of expense reports by the CEO, claims that he sexually harassed an employee, and further damning is a severance package of $40 million as he leaves,” Hanna said. “We have too much at stake.”

The former CEO surprised the board by settling a sexual-harassment claim before directors were fully aware of the incident, an act they considered a final breach of trust that added to the board’s already strained relationship with Hurd, the Wall Street Journal reported. The board’s subsequent decision to fire Hurd has been met with mounting criticism for firing the chief executive based on a pretext as opposed to ousting him because of his disproportionate focus on short-term gains and lack of vision, New York Times columnist Joe Nocera remarked.

“HP lost significant credibility,” claims the Brockton Contributory Retirement System in a lawsuit filed last week in the Superior Court of Santa Clara County, California, Reuters reported. The complaint includes an order that the individual defendants pay HP damages, the imposition of a constructive trust on Hurd’s severance and profits from alleged improper trading activities, punitive damages, and other remedies.

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On August 6, following an investigation that examined a sexual harassment claim, defined by HP as a conflict of interest, that discovered Hurd had falsified expense reports to conceal a relationship with a female marketing consultant, a former actress named Jodie Fisher who worked for HP as an event organizer, the CEO announced his resignation from Hewlett-Packard. According to the lawsuit, HP shares slumped following Hurd’s departure, erasing $9 billion in market value. The suit also alleges that directors of the Palo Alto, California-based company failed to “police insider trading” by not fully disclosing the internal probe into Hurd’s activities, while additionally claiming the directors tried to grant Hurd tens of millions of dollars he did not deserve.

The defendants in the lawsuit include the company’s chief financial officer, Cathie Lesjak, who, following Hurd’s departure, has become the company’s interim CEO. In the pension plan complaint, both Hurd and Lesjak are accused of engaging in insider trading while at HP.

The case is Brockton Contributory Retirement System v. Andreessen et al, Superior Court of California, Santa Clara County.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742