Ellen Schultz - Retirement Heist

50 about one-third of blue-collar workers:Bureau of Labor Statistics, 2010.

50 The Marine Engineers’ Beneficial Association:Theo Francis, “Pension Tension.”

51 Mary Fletcher, a marketing services trainer:Author interview.

52 During oral arguments before the Supreme Court: Amara v. Cigna, November 30, 2010.

55 Their primary tools included the new accounting rules:Financial Accounting Standards Board, “Employers’ Accounting for Pensions,” Statement of Financial Accounting Standards No. 87, 1985.

57 “You could have real economic wealth transfers”:Julia D’Souza, John Jacob, and Barbara Lougee, “Why Do Firms Convert to Cash Balance Pension Plans? An Empirical Investigation,” American Accounting Association, Annual Meeting, 2003.

58 companies with the most pension income:Ellen E. Schultz, “Joy of Overfunding: Companies Reap a Gain of Fat Pension Plans,” The Wall Street Journal, June 15, 1999.

58 Patricia McConnell, a senior managing director at Bear Stearns:Robert McGough and Ellen E. Schultz, “How Pension Surpluses Lift Profits,” The Wall Street Journal, September 20, 1999.

60 Researchers at Harvard:Daniel Bergstresser, Mihir Desai, and Joshua Rauh, “Earnings Manipulation, Pension Assumptions and Managerial Investment Decisions,” Quarterly Journal of Economics, February 2006.

62 The panelists put on a skit:“Consulting in Mergers & Acquisitions” panel, Conference on Consulting Actuaries, Colorado Springs, 1996.

63 Warren Buffett, chairman of Berkshire Hathaway:Warren E. Buffet, “Who Really Cooks the Books?” editorial, The New York Times, July 24, 2002.

65 “Health care costs continue to skyrocket”:John McDonnell, CEO, McDonnell Douglas, letter to retirees, October 7, 1992.

67 A sample from late 1991:“Automakers Face Massive Charges,” Associated Press, November 12, 1991; “Rude Awakening on Health Costs,” The Los Angeles Times, November 13, 1991; Lee Burton and R. J. Brennan, “New Medical-Benefits Accounting Rules Seen Wounding Profits, Hurting Shares,” The Wall Street Journal, April 22, 1992.

67 “The Street views FAS 106 obligations”:Ethan Kra, then the chief retirement actuary at William M. Mercer, “Basics of Funding Retiree Medical,” Proceedings of the Conference of Consulting Actuaries, 1996.

68 McDonnell Douglas’s pump-and-dump maneuver:Company filings; Ellen E. Schultz, “This Won’t Hurt: Companies Transform Retiree-Medical Plans into Source of Profits,” The Wall Street Journal, October 25, 2000.

69 “they created a piggy bank of earnings improvers”:Jack Ciesielski, “Why SFAS Is Not a Dead Issue,” Vol. 3, No. 3, The Analyst’s Accounting Observer, March 23, 1994.

70 R.R. Donnelley, a printing company based in Chicago:Ibid.

71 his largest client, a Big Six accounting firm, fired him:Jeffrey Petertil, “Ignore the Retiree Health Benefits Rule,” The Wall Street Journal, February 21, 1992.

71 Defense contractors and public utilities had an additional incentive:Schultz, “This Won’t Hurt.”

72 Shaklee had to take a minimum-wage midnight-shift job:Author interview.

72 “Just as in war, there are no winners”:Unisys Corp. Retiree Medicare Benefits Erisa Litigation, No. MDL 969, U.S. District Court, E.D., Penn., Aug. 13, 1996.

74 Liz Rossman, Sears’s vice president for benefits:Author interview.

75 Robert Eggleston, an IBM retiree in Lake Dallas:Author interview.

75 Xerox split its active and retired employees into two pools:Company confirmed.

76 Eugene Nathenson, a retired controller:Author interview.

77 William Falk, who oversaw the retiree medical consulting practice:Conference of Consulting Actuaries, October 1998.

77 Companies could also adopt “more aggressive assumptions”:Enrolled Actuaries meeting, Washington, D.C., March 1998.

78 The flexibility built into the accounting rules:For a detailed examination, see Julia D’Souza et al., “Accounting Flexibility and Income Management: The Case of OPEB Recognition,” Johnson School of Management, Cornell University, 1999.

80 “I guess I’m going to have to die before then”:Author interview with Margaret Jelly.

81 Ackerman had flown corporate jets:Author interview.

83 Justin Freeborn, a legal-aid lawyer:Author interview.

84 found a note from the retired executive, with a personal:Author interview with Audrey Ackerman.

85 Fidelity… concluded that 316 retirees had mistakenly been paid:Author interview with BP official.

85 Craven, a widower with macular degeneration:Author interview.

91 Schacht made a presentation to a group:Interviews with Lucent retirees, Henry Schacht.

92 Howard O’Neil, who was ninety at the time:Author interview.

93 Parano… sued Lucent in small claims court:Author interview with Joseph Parano, California; Joseph and Susan Parano v. AT & T Corp. , Case No. SCS 114017 and 114097, Small Claims Court, San Mateo, 2004.

94 Connie Sharpe, a widow in Las Cruces, New Mexico:Author interview.

96 Walt Ehmer… chief executive of Lucent Technologies Denmark:Author interview.

97 Schacht later defended the bonuses:Author interview.

104 GM has often claimed that its U.S. pension plans:Ellen E. Schultz and Theo Francis, “Hidden Burden: As Workers’ Pensions Wither, Those for Executives Flourish—Companies Run Up Big IOUs,” The Wall Street Journal, June 23, 2006.

104 board of directors of Mercantile Stores met:Transcripts of Mercantile board meetings.

108 total retirement payout was more than $130 million:estimate of total by Theo Francis, Footnoted.org.

113 executives were receiving more than one-third of all pay:This and other details in this section are based on the author’s calculations and analysis, which were confirmed by Stephen Goss, chief actuary of the Social Security Administration.

114 “The most important contributor to higher profit margins over the past five years”:Steven Greenhouse and David Leonhardt, “Real Wages Fail to Match a Rise in Productivity,” The New York Times, August 28, 2006. Thanks to colleague Tom McGinty for pointing this out.

116 Just before Christmas 2008, Irma Johnson: Irma Johnson v. Amegy Bank, No. 4:2009cv01424 (Southern District of Texas, 2009).

117 “dead peasants insurance”:The memos were exhibits in a lawsuit in which the United States Court of Appeals for the Eleventh Circuit held that Winn-Dixie’s COLI policies were a sham transaction for federal income tax purposes. Winn-Dixie Stores, Inc. v. Commissioner of Internal Revenue, No. 00-11828 (U.S. Court of Appeals, Eleventh Circuit, 2001).