J.C. Penney Completes Pension Liabilities Transfer to PBGC

At long last, the Pension Benefit Guaranty Corporation (PBGC) has taken over the pension plan for J.C. Penney, which covers about 36,000 beneficiaries.

The long-beleaguered American department store chain, which filed for bankruptcy protection in May, is preparing to sell its retail and operating assets to a joint venture led by mall operators Brookfield Asset Management and Simon Property Group, PBGC said Friday. Another 160 of the chain’s real estate assets will be handed over to its first lien lenders.

The federal insurer PBGC stepped in to take over the pension plan after both Brookfield and Simon Property declined to assume the pension liabilities. The pension plan officially terminated Friday.

“This action allows the agency to continue delivering hard-earned benefits as allowed under the law and to provide retirees with information that will help them plan for the future,” PBGC Director Gordon Hartogensis said in a statement.

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The pension transfer is good news for J.C. Penney, which had been seeking to expedite a sale to avoid a forced liquidation of its operations. PBGC estimates the J.C. Penney pension plan is 92% funded, with about $3.3 billion in assets and roughly $3.6 billion in benefit liabilities, meaning the entire plan is underfunded by $270 million.

The decision is good for mall owners, which are already dealing with other vacancies and deteriorating foot traffic. These landlords are unlikely to be able to replace a significant anchor tenant such as J.C. Penney in the middle of a pandemic. Operators are hoping that J.C. Penney CEO Jill Soltau will turn the business around.

Year to date, stock prices for significant mall owners such as Simon Property and Brookfield have fallen across the board, even as broader benchmarks have rallied. Since January, Brookfield is down 14% to about $33 per share. Over the same period, Simon Property has cratered 58% to about $62 per share.

For some investors, those dislocations could be cheap enough to present opportunity. While shopping malls are believed to be past their heyday, some are expected to survive and remain viable investments. Simon Property, with its 200 shopping malls, has a portfolio of desirable assets in good locations.

PBGC said retirees will receive benefits without any interruptions to their plans, and future retirees can apply for benefits once they are eligible.

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Tags: Brookfield Asset Management, JC Penney, PBGC, Pension Benefit Guaranty Corporation, shopping malls, Simon Property Group

The FBI arrested the chairman and CIO of a Florida-based wealth management firm and charged him with securities fraud and wire fraud for his alleged role in a purported scheme to fraudulently induce individuals to invest with him under false pretenses, including operating under an alias to hide his criminal past.

According to the FBI, Terrence Chalk allegedly solicited more than $4 million from investors—in some cases convincing them to clear out their retirement savings and pensions—with promises of investments that would pay out returns of at least 12% and as high as 77%. He also used the pseudonym Dr. Terrence Cash, or Dr. Cash, to allegedly hide the fact that he was a convicted felon.

The FBI said Chalk failed to inform investors that he was sentenced to more than six years in prison in 2010 for participating in a conspiracy to make false statements and representations to financial institutions in connection with applications for loans, lines of credit, and credit cards, and for identity theft for using another person’s Social Security number to seek a line of credit from a bank.

Attempts to reach Chalk were unsuccessful.

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According to the complaint against Chalk, within months of taking the clients’ investments, their promised return payments began to arrive erratically or not at all as Chalk had not made all the promised investments. He allegedly invested no more than $1.2 million of the $4 million he received from investors. Instead, he allegedly diverted most of the funds into other accounts with his firm, Greenlight Investment Partners, and he used those accounts to spend money on himself and his friends. This included approximately $1.7 million on credit card bills for cards in his name, or in the names of his associates, more than $70,000 to a luxury car dealer, approximately $30,000 to a jewelry retailer, approximately $17,000 for NBA season tickets, and more than $20,000 to a prison inmate.

“Terrence Chalk gained the trust of his clients by promising that he would invest it in opportunities he had vetted,” Acting Manhattan US Attorney Audrey Strauss said in a statement. “He concealed his criminal past, did not make the investments as promised, and sent most of the money he took from his clients to a pool of money from which he spent lavishly on himself and his friends.”

Chalk was the chairman of Greenlight Investment Partners and Greenlight Investment Circle, among other firms with similar names. According to the complaint, the Greenlight companies offered customers “business, money, and wealth coaching,” as well as advice and training in investment planning and wealth management. Chalk also offered to some of his coaching clients the opportunity to be part of the so-called “Chairman’s Fund,” which he boasted was an elite investing arrangement in which clients would purchase equity stakes in Greenlight and Chalk would invest the purchase proceeds into individual ventures he had vetted.

Chalk, 58, is charged with one count of securities fraud and one count of wire fraud, each of which carries a maximum sentence of 20 years in prison.