Surprise! Twinkie CEO admits company took employees pensions and put It toward executive pay
Dec 11, 2012 | Thom Hartmann
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
[3] 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.
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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 [4] - 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
[5] 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.
Hostess CEO Gregory Rayburn wanted to make it clear that he wasn't
around when that particular thing happened. "Whatever the circumstances
were, whatever those decisions were, I wasn't there," Rayburn told the
Wall Street Journal.
After all, Rayburn isn't a baker - he's a bankster. He's the owner of
Kobi Partners, a company that tells corporations how to "restructure."
Think Mitt Romney. And he's going to make out very well on all this -
the bankruptcy court just okayed $1.8 million in Christmas bonuses for
the new fatcats at Hostess.
Ironically, if you borrow money to pay for your education, you can't get
rid of that debt through bankruptcy - one of the "reforms" of the
bankruptcy law during the Bush era. But if you're a CEO or a buyout
bankster and you borrow money from your employees' trust fund to be able
to cover your own paycheck and million-dollar bonuses, and then take
your company into bankruptcy, neither you nor the company have to pay
those employees back even a single penny. Part of their pension is
picked up by the taxpayers, and the rest is just lost.
There used to be a time in America when businesspeople had at least a
modicum of ethics. Mostly it was because the majority of businesses were
small- or medium-sized and locally owned, so the owners and managers
had to look the employees in the eye. Or the unions were strong enough
to keep the CEOs honest.
Reagan put an end to all that when he stopped enforcing the Sherman
Anti-Trust Act, wiping out most of America's small and medium-sized
businesses, and when he kicked off the modern war on unions by firing
the PATCO union strikers. You can see the result most clearly at any
shopping mall or any downtown in America. What used to be locally owned
business are now big chains, from food to jewelry to clothing.
It used to be that CEOs shared the pain. Lee Iacocca famously took a
dollar a year as pay when he was working to turn around Chrysler. Steve
Jobs did the same when Apple was in trouble. Pretty much everybody who's
ever started a small business knows what it's like to make payroll for
workers while taking little to nothing themselves during the early years
of the company.
But in today's post-Reagan, Bain-model American capitalism, there's
never any risk for the CEO class. Instead, all the risk is borne by the
workers.
Karl Marx famously wrote that capitalism contains within itself the
seeds of its own destruction. If true, the young, green shoots of that
destruction may well be the corporate and billionaire excesses, ranging
from the Hostess debacle to the billionaire oligarch Koch Brothers
funding anti-union efforts by Rick Snyder and Republicans in Michigan.
Links:
[1] http://www.alternet.org
[2] http://www.alternet.org/authors/thom-hartmann
[3] http://online.wsj.com/article/SB10001424127887323316804578165813739413332.html?mod=googlenews_wsj
[4] http://www.dailykos.com/story/2012/11/18/1162786/-Inside-the-Hostess-Bankery
[5] http://s1307.beta.photobucket.com/user/MikeHummell/media/hostessletter.jpg.html
[6] http://www.alternet.org/tags/twinkie
[7] http://www.alternet.org/tags/hostess-0
[8] http://www.alternet.org/tags/workers
[9] http://www.alternet.org/tags/pensions
[10] http://www.alternet.org/%2Bnew_src%2B
