ESOP LAWSUIT

wts54

Senior
Sep 16, 2002
374
0
www.usaviation.com
Press Release Source: Hagens Berman
United Airlines Employees Sue ESOP, Committee
Friday February 28, 7:12 pm ET
CHICAGO, Feb. 28 /PRNewswire/ -- A group of United Airlines (NYSE: UAL - News) employees today filed a lawsuit against the airline''s employee stock ownership plan (ESOP) and its trustees, claiming those charged with protecting the interests of the employee-owners failed in their duties, costing the employee-owners billions of dollars.
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Filed in US District Court in Chicago by Seattle attorney Steve Berman, the suit claims the UAL ESOP committee -- all employees of UAL -- was not objective in its decision to hold UAL stock as it plummeted in value even before the September 11, 2001 attack, which further weakened the stock price.
The stock was trading in the high 30s in January 2001 and today trades at under $1.50 a share.
The proposed class-action lawsuit seeks to represent thousands of employees who are or were participants or beneficiaries of the UAL ESOP as of July 19, 2001.
According to the complaint, the plan trustees fell short of their duty when they failed to move ESOP holdings to less risky, more appropriate investments, all while failing to disclose that the stock was an imprudent investment.
The suit claims that UAL was in deep financial difficulty well before the September 11 attack, and the plan trustees ignored the warning signs, including grim forecasts by the UAL leadership. Even after the September 11 attack, UAL CEO James Goodwin noted that the problems at UAL were deep and systemic.
According to Goodwin, Before September 11, we were not in a comfortable financial state, with costs exceeding our revenue on a daily basis ... Clearly this bleeding has to be stopped -- and soon -- or United will perish sometime next year.
UAL''s CEO was telling the world that UAL was in trouble, painting a vivid picture of the stock''s unsuitability for the ESOP, said Berman, the managing partner of Hagens Berman. Even with these dire predictions, the ESOP trustees did not make the obvious conclusion that the stock was not an appropriate investment for the employee-owners, many of which were looking to their ESOP investment for retirement.
According to the complaint, it took many more months after Goodwin''s statement before the plan trustees brought in State Street Bank for a truly independent look.
In September 2002, the UAL ESOP committee acknowledged this conflict of interest in a series of company documents and hired State Street Bank to provide independent recommendations, the complaint states. In the same month, State Street Bank concluded that the ESOP was over-invested in UAL stock, and began selling UAL stock. By month''s end, State Street had sold 9.4 million shares.
The plaintiffs charge that this delay cost the employees billions of dollars by not selling UAL stock when it was apparent it was far too risky an investment.
While the UAL ESOP states that it should be invested exclusively in UAL stock, that did not override the plan administrators'' responsibility to protect the plan members, the suit states.
In contrast, Berman points to a similar case in which the American Airlines 401(k) plan dumped its own stock, concluding it was too risky an investment. In this case, the trustees of the plan fulfilled their responsibility to safeguard the investments of the plan participants, Berman added.
The UAL Employee Stock Ownership Plan (ESOP) was formed in 1994 as a vehicle to recapitalize the airline. The employees invested several billion dollars in exchange for 55 percent ownership in UAL. The employees also gave UAL significant wage and benefit concessions as part of the package.
For more information about this suit, visit www.hagens-berman.com.
About Hagens Berman
Steve Berman is managing partner of Hagens Berman, a law firm with offices in Seattle, Boston, Los Angeles and Phoenix. Recently named co-lead counsel in litigation to recover losses from Enron employees'' retirement funds, Berman is a nationally recognized expert in class action litigation. Berman represented Washington, Idaho and 12 other states in lawsuits against the tobacco industry that resulted in the largest settlement in the history of litigation. Berman also served as counsel in several other high-profile cases including the Washington Public Power Supply litigation, which resulted in a settlement of more than $850 million, and the $92.5 million settlement of The Boeing Company litigation. Other notable cases include litigation involving the Exxon Valdez oil spill; Louisiana Pacific Siding; Morrison Knudsen; Piper Jaffrey; Nordstrom; Boston Chicken; and Noah''s Bagels.
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Source: Hagens Berman
 

atabuy

Senior
Oct 13, 2002
419
0
Aloha everyone. I returned from a nice Hawaii vacation to see Ual still has no clue. Even though they have a plan of a low cost carrier within a carrier, until they reduce non essential jobs, which they beleive they need right now, and fix wages to revenue, they will not ever make the right decisions.


I think I will wait for the lawsuits against Goodwin and the rest of his team that wanted to purchase U and do the small jet leasing.

( I am being unrealalistic, but I can dream can't I? )

They were the leaders of Ual well before 9/11 who set us up for the aftermath of 9/11 and still, long after that date, no one has presented real defined changes which will put us in the best possible position to survive.
Yet, they still have a lot of the same management and excess vp's within the ranks.