The single largest pension default in U.S. history should never have happened, say former pilots who lost stock and the bulk of their pensions in the United Airlines bankruptcy.
The pilots say they are in the early stages of preparing to file a RICO lawsuit based on what they claim was the airline’s fraudulent listing of its frequent flyer Mileage Plus asset – worth an estimated $15 billion at the time - as a liability in documents submitted to a Chicago bankruptcy court and the federal Pension Benefit Guarantee Corporation (PBGC), which took over all of the airline’s pension obligations.
Jerry Summers, a former United pilot who involuntarily retired after 36 years of flying, told The Examiner he expected a pension of $10,000 per month, but now gets less than half that amount even though the pilots’ pension fund was 85 percent funded. “Nobody expected this bloodbath,” he said.
Summers added that PBCG inexplicably agreed to hold United “harmless” against future guaranteed claims, even though “no one can make sense of how the numbers were computed.” Airline employees were also told that it would take a “few months” to issue final determination letters from PBGC regarding their reduced pensions. Five years later, they’re still waiting.
“The bottom line, based on the undisclosed Mileage-Plus asset, estimated at $15 billion, is that this bankruptcy should never have been allowed,” Summers added.
“Employee owned stock was allowed to plummet to near zero value before it was sold with the bankruptcy judge’s approval,” former United 777 captain Dan Hanley, now national spokesman for the Whistleblowing Airline Employees Association, charged in an Oct. 18, 2007 letter to SEC chairman Christopher Cox, a copy of which was also delivered to then Illinois Sen. Barack Obama. “The employees were prevented from selling their stock during this time frame.”
Hanley’s letter also alleges that investment banks, in particular major creditor Goldman Sachs, participated in falsifying the publicly-traded airline’s financial records to obfuscate its true financial picture. The airline’s lead bankruptcy attorney accepted a job with Goldman Sachs immediately after Chicago Seventh Circuit Chief Bankruptcy Judge Eugene R. Wedoff declared United bankrupt in 2005, approving a plan to terminate employee pensions in what was the largest corporate pension default in American history.
In a scenario eerily reminiscent of Enron, top-level corporate officers cashed out as their lower-level employees lost billions. The pension liabilities were then transferred to taxpayers via PBGC, which is now close to insolvency itself.
Wedoff was the same judge presiding over the 2001 bankruptcy of McCook Metals, whose owner, Michael Lynch, asserted in a 2006 sworn affadavit submitted to the court that he had evidence “confirming the existence of an alleged, organized nation-wide criminal enterprise involving officers of state and federal courts who exploit litigants for the personal financial gain and who unlawfully manipulate and exploit the judicial system at the expense of state and federal taxpayers.”
A key witness in an ongoing SEC investigation into the United bankruptcy, Lynch is on the verge of being arrested in Chicago for “contempt of court” in another Cook County court proceeding, The Examiner has learned.
Lynch said he turned over material evidence, including “bank accounts, real estate holdings, trust accounts, and fake real estate deeds of multiple allegedly corrupt judges and attorneys” to authorities, including what he said was evidence of a $40 million “bribery fund” Wedoff allegedly used to hide money from federal authorities in a trust, including fake real estate transactions he says were covered up by LaSalle Bank, Wells Fargo and Northern Trust Bank.
Judge Wedoff refused to recuse himself in a current case involving a company owned by Lynch’s brother, which Lynch claims is retaliation for his allegations of judicial corruption.