Monday, September 16, 2002
It all depends on your point of view: I'm not going to defend Secretary of the Army Thomas White from Paul Krugman. I'm no fan of Enron, but I am going to continue to correct a couple of misleading statements that Krugman seems intent on perpetuating.
[I]n February 2001 Enron presented an imposing facade, but insiders knew better: they were desperately struggling to keep their Ponzi scheme going. When one top executive learned of millions in further losses, his e-mailed response summed up the whole strategy: "Close a bigger deal. Hide the loss before the 1Q."
The strategy worked. Enron collapsed, but not before insiders made off with nearly $1 billion. The sender of that blunt e-mail sold $12 million in stocks just before they became worthless. And now he's secretary of the Army.
I've said it before, and I'll say it again. White was tardy in selling that $12 million in stock. He'd been ordered to divest himself months earlier, when the stock was at a much higher price, but had delayed. When White sold his stock it was on the way down, but not yet at rock-bottom.
What was the cause for the delay? Who knows? But if White was as knowledgeable about what was going on as Krugman suggests, he would've sold his stock much earlier.
I keep getting confused, one minute conservatives are stupid (see economic policies) and the next second they're these brilliant schemers. Maybe all conservatives suffer from multiple-personality disorder.
Then, as is his custom and practice, Krugman goes after Vice President Dick Cheney.
It was crony capitalism at its worst. What kind of administration would keep Mr. White in office?
A story in last week's Times may shed light on that question. It concerned another company that sold a division, then declared that its employees had "resigned," allowing it to confiscate their pensions. Yet this company did exactly the opposite when its former C.E.O. resigned, changing the terms of his contract so that he could claim full retirement benefits; the company took an $8.5 million charge against earnings to reflect the cost of its parting gift to this one individual. Only the little people get shafted.
The other company is named Halliburton. The object of its generosity was Dick Cheney.
Don't even get me started on the "What kind of administration would keep..." line. We can rewind to the Clinton Administration and all of the problems Clinton had with his cabinet officers, but that would take too much time.
You can find the article that Krugman references here. As is his custom, Krugman simplifies a complicated issue in order to cast it in an unfavorable light. Let's take it as a given that Cheney got a sweetheart deal on his pension. Is it uncommon for CEOs? Nope. GE's retired CEO Jack Welch got a sweetheart deal that embarrassed even him, now that it's public, into returning much of it.
If Krugman wants to bash corporate America's overpaid CEOs, that's fine. I think they're grossly overpaid, but I don't necessarily blame the CEO -- I blame the board of directors. Of course, it's easier to vilify one person rather than a dozen.
Are the "little people" being screwed out of their pensions? Maybe, but not necessarily by Halliburton.
What Krugman left out:
Halliburton responded to questions with a statement, saying that the Dresser-Rand employees who had turned 55 before the unit was sold would still receive all their pension options and benefits, as if the acquisition and spinoff had never happened. Officials had considered preserving the younger workers' benefits as well, Halliburton added, but decided not to, because "it would be, in effect, paying for service with Dresser-Rand" after the employees had begun working for the company that had bought the unit. The buyer was Ingersoll-Rand, an industrial conglomerate that has its headquarters in Woodcliff Lake, N.J., and is incorporated in Bermuda.
Halliburton said about 140 workers would get full benefits and about 300 workers were affected by the change. According to Halliburton, it "would have been entirely up to Ingersoll-Rand" to establish a new pension plan for the workers under 55, matching the benefits they had lost as a result of the spinoff.
Paul Dickard, a spokesman for Ingersoll-Rand, disagreed. "This really remains a Halliburton obligation," he said. "It's very clear."
The finger-pointing between Halliburton and Ingersoll-Rand is only part of the employees' problems as they struggle to sort out what happened to the money they were repeatedly told they had coming.
So, there's some dispute over who is responsible for the pension benefits now. Not as clear-cut, black and white as Krugman portrayed it. Is this uncommon in corporate takeovers? From my experience, the answer is "no." One newspaper I used to work for, The North County Times was recently bought by Lee Enterprises. What happened to the employees? Well, among other things, their pension went adios, their sick days went adios, and they stopped accruing vacation time on a weekly basis.
It would be nice if every company treated its employees fairly -- if that were ever to occur there'd be no unions. Unfortunately it's not a perfect world.
On a related note: I wonder what happened to the pensions of Global Crossing employees?