Twinkie CEO Admits Company Took Employees Pensions and Put It Toward Executive Pay

Twinkie-maker Hostess continues to screw over its workers.

The company is in the process of complete liquidation and 18,000 unionized workers are set to lose their jobs. More troubling – they could lose their pensions.

According to a report by the Wall Street Journal , Hostess’ CEO, Gregory Rayburn, essentially admitted that his company stole employee pension money and put it toward CEO and senior executive pay (aka “operations”). While this isn't technically illegal, it's another sleazy theft by Hostess executives - who've paid themselves handsomely while running their company into the ground. Just last month, a judge agreed to let Hostess executives suck another $1.8 million out of the bankrupt company to pay bonuses to CEOs.  

If there's no way to recover the money for the Hostess pension plans for workers, then we the taxpayers - through the Pension Benefit Guaranty Corp. - will have to foot the bill to make sure workers get the retirement money they paid in.

Hostess shows us clearly what Bain-style predatory capitalism is all about: big bucks for the very few rich executives, layoffs and poverty for the workers and their communities.

And don’t mourn the loss of Hostess brands – they’ll be back, as the company is currently negotiating with over 100 potential buyers right now to bring Twinkies, Wonder Bread, and Ding Dongs back into the marketplace.  

The Hostess story has nothing to do with unions, and everything to do with the Enron-ization and Bain-ization of the American economy.  

In classic Enron style, back in 2005 Hostess sent out a letter saying they’d just had a very, very profitable quarter.  Their stock jumped up. The CEO, Charles Sullivan, and many of the senior executives sold chunks of their stock.   The CEO and senior executives were making out big, and the workers were making a decent living.

At that time, one of the hostess workers – Mike Hummel, blogging as bluebarnstormer over at Daily Kos – noted that he was making $48,000 a year, a bit over the US median household income, and had insurance and a pension.  

Then, a few weeks later in 2005, came the letter saying that, oops, all of that profit had really been just an accounting error – the company was actually in trouble.  Although the CEO and the top guys had all made a nice killing selling the stock when it was high, and paying a maximum income tax on it of 15 percent because they used the Capital Gains loophole that Mitt Romney used to become a multimillionaire, they now wanted the workers to take a big pay cut.

Hummel notes that the “oops” letter became the justification for asking the workers to take a pay cut, which they agreed to, and his pay dropped from $48,000 a year in 2005 to $38,000 a year last year.  But every year, $3 an hour of his compensation showed up in the worker’s pension fund instead of his paycheck.  Year after year.  With 18,000-plus workers, it was millions and millions of dollars.  Dollars that the workers had paid in, at the rate of $3 per hour.  

Then came the Bain-style takedown.  In order to strip the company down to its individual brands and sell them off, piece by piece, the company needed to bust the union.  The union said, “No,” so the company went to bankruptcy court – a method Bain and other vulture capitalists often use to kill off unions.

In the meantime, the CEO and senior executives were paying themselves handsome salaries and big bonuses.  And where was that money coming from?  

On August 12 of 2011, the employees got a letter that said that the company was going to “temporarily suspend payments” to its pension funds.  That would be the $3 per hour that this worker had negotiated as part of his compensation – instead of paying it to him by putting it into his pension fund now, the company said they were going to put it in later.

As the letter said, “I want to be clear that this temporary suspension of payments to the pension fund will not affect your pension benefits.”  

Workers believed management, and kept on working.  

But, it turned out, as we learned from that interview in today’s Wall Street Journal , that the senior management wasn’t just “borrowing” the pension funds – they were using them to fund ongoing operations.  Including big paychecks to the fatcats.  


cont:
http://www.alternet.org/corporate-accountability-and-workplace/twinkie-ceo-admits-company-took-employees-pensions-and-put-it?page=0%2C1

[rivll]

I suppose they didnt have a union...rightz--who needs them?

[rivll]

Oh that's right we were actually blaming the union awhile back for the shutdown...

[teko]

Yep, the company steals, the workers are out of a job, the CEO gets richer and the union gets the blame. ONLY in America. Poor Poor picked on rich sleazers.

[brice1967]

The very first paragraph says that they were unionized....  Don't worry,  The union will save them.

[orphanedhawk]

That was a rather callous remark concerning people being fired and their pensions being stolen by the fat cats.

This kind of behavior by corporate bosses is why people need unions.

[brice1967]

Well, the union better do their jobs then.... (If anyone of those 18,500 people goes into litigation and has to pay an attorney, the union did jack squat.)

[Vance2335]

THE UNION IS RESPONSIBLE. Hostess said come back to work or we will have to shut down, union said F you and what do you know they had to shut down. So year lets blame the company for having to shut down because it could not produce product because the union made people strike. You all seem to be blind to reality.

If you didn't show up to work one day and the next day the company replaced you is that the companies fault or it is your fault?

[rivll]

Main point from above article:

The Hostess story has nothing to do with unions, and everything to do with the Enron-ization and Bain-ization of the American economy.  

In classic Enron style, back in 2005 Hostess sent out a letter saying they’d just had a very, very profitable quarter.  Their stock jumped up. The CEO, Charles Sullivan, and many of the senior executives sold chunks of their stock.   The CEO and senior executives were making out big, and the workers were making a decent living.

At that time, one of the hostess workers – Mike Hummel, blogging as bluebarnstormer over at Daily Kos – noted that he was making $48,000 a year, a bit over the US median household income, and had insurance and a pension.  

Then, a few weeks later in 2005, came the letter saying that, oops, all of that profit had really been just an accounting error – the company was actually in trouble.  Although the CEO and the top guys had all made a nice killing selling the stock when it was high, and paying a maximum income tax on it of 15 percent because they used the Capital Gains loophole that Mitt Romney used to become a multimillionaire, they now wanted the workers to take a big pay cut.

And now the CEO's are stealing the worker's pensions.
How can you not be outraged?

[mikesimon]

And now this is the union's fault?

Please, can we have just a glimmer of sanity from the right?

No, probably not!

[Vance2335]

Mike it is not the unions fault about the info in the article, it is the unions fault that 18000 people are out of work.

It is messed up that pensions are going to someone else other then the employees who were expecting them. But I don't think they should have had pensions to begin with.

[nursegirl6572]

I honestly think that blame lies on both sides.  It doesn't shock me to hear of the dirty crap companies do...and it's wrong, no two ways about it.

I'm not sure how much truth there is to the fact that they claimed to be in financial trouble when they weren't.  They DID go under after all.  I DO think the union (maybe understandably to a point) had its guard up...but in turn, they were being unreasonable.  I mean, even at the bitter end, they wouldn't negotiate.

I didn't agree with the bonuses either.  That raised some red flags for me.  I have NO problem with these execs getting paid their salary while finishing things up, but bonuses?  When almost 19K people are out of work?  Eh, that doesn't sit well with me, as I had said.

I don't think this is as black and white as both sides are making it.  My guess it, they both shoulder some blame in the company's demise.  How much on either side?  I wouldn't even dare guess.  Both sides have offered very politically slanted versions...so we know the truth is somewhere there, in the middle.

I just want my freaking twinkies....ARGH!

[brice1967]

I'm not saying this thievery is the unions fault.  I am saying the union didn't do a thing to help these people keep their jobs.  The union clearly said no dice to an offer... compromise was not part of the equation and therefore 18.5k are jobless.  

How would the unions stop the thievery?  They can't.... next issue.