The Labor Department is investigating whether Northwest Airlines systematically shortchanged its employee pension fund over three years, then avoided having to make a $65 million payment to the fund by filing for bankruptcy protection just one day before the payment was due.
The government has subpoenaed voluminous and detailed information from Northwest going back to January 2002, when both the airline and its pension fund faced severe financial pressures after the terrorist attacks of 2001 and the bursting of the technology bubble in the stock market.
The investigators appear to be tracing the steps that led to the pension fund's recent shortfall of $5.8 billion, and whether Northwest violated any laws.
The investigation has implications for many businesses besides Northwest that have shaky pension plans. It suggests that the Labor Department is looking for a way to break an entrenched pattern, in which distressed companies quietly deplete their pension funds over a number of years, then declare bankruptcy and transfer huge obligations to the federal government.
Officials of the Labor Department confirmed the investigation but declined to elaborate, other than to say it was a civil matter concerning the parts of the pension law that deal with funding and the disclosure of information to participants and regulators. The officials also said that the inquiry was looking at whether corporate pension officials had administered the plans "solely in the interest of the participants" in the pension plans, which would fulfill their fiduciary duty. The subpoena was served in January.
TheLedger
The government has subpoenaed voluminous and detailed information from Northwest going back to January 2002, when both the airline and its pension fund faced severe financial pressures after the terrorist attacks of 2001 and the bursting of the technology bubble in the stock market.
The investigators appear to be tracing the steps that led to the pension fund's recent shortfall of $5.8 billion, and whether Northwest violated any laws.
The investigation has implications for many businesses besides Northwest that have shaky pension plans. It suggests that the Labor Department is looking for a way to break an entrenched pattern, in which distressed companies quietly deplete their pension funds over a number of years, then declare bankruptcy and transfer huge obligations to the federal government.
Officials of the Labor Department confirmed the investigation but declined to elaborate, other than to say it was a civil matter concerning the parts of the pension law that deal with funding and the disclosure of information to participants and regulators. The officials also said that the inquiry was looking at whether corporate pension officials had administered the plans "solely in the interest of the participants" in the pension plans, which would fulfill their fiduciary duty. The subpoena was served in January.
TheLedger
