PBGC Accused of Lax Controls; Faces $12.9 Billion Deficit

(May 4, 2010) — The Pension Benefit Guaranty Corporation (PBGC) has been cited for lax controls, alarming key members of Congress.

As a result of the economic downturn, PBGC’s assets were strained as the number of waning US companies with pensions that needed to be rescued spiked. In December 2008, when Lehman Brothers defaulted on pensions of 22,000 employees, for example, PBGC assumed responsibility.

“PBGC did not have effective internal control over financial reporting (including safeguarding assets) and compliance with laws and regulations and its operations,” Rebecca Anne Batts, the PBGC inspector general, wrote in a recent letter.

The Center for Public Integrity found, after examining hundreds of internal memos, audits, and other documents, that PBGC had misled Congress and its inspector general to believe long-term problems were settled, a potential criminal violation. Additionally, the Inspector General recently criticized the firm’s CEO Charles Millard for getting involved in negotiations for lucrative contracts with big name Wall Street bidders, including Goldman Sachs Group Inc, BlackRock Inc., and JP Morgan Chase & Co., as they were bidding for contracts to invest or manage $2.5 billion of the corporation’s money, CBS News reported.

Created in 1974, PBGC, now running a $12.9 billion deficit, is responsible for protecting the pensions of 44 million retirees and workers in the US if their employers get into financial trouble.