Aircraft Mechanics Fraternal Association asked for a forensic audit of United Airlines' pension funds to determine if malfeasance contributed to their demise, in light of the SEC report issued last month on potential serious conflicts of interests in the pension consulting industry.
In a letter sent Tuesday to Bradley D. Belt, PBGC executive director, and Elaine L. Chao, Labor secretary, O.V. Delle-Femine, national director of the AMFA, asked the PBGC to "undertake forensic audits of any distressed plans in order to determine whether any of the parties providing financial services to the plans may have contributed to their demise." The letter was also sent to members of the Senate Finance Committee and the House Committee on Education and the Workforce, as well as Glenn Tilton, president and CEO of United parent UAL Corp., Chicago. The AMFA represents 6,500 United mechanics and some other ground workers, said Maryanne DeMarco, AMFA legislative liaison.United's pension plans had $7.1 billion in combined assets and $13.5 billion in total liabilities as of Dec. 31, according to an SEC filing.
The letter noted that the PBGC is "increasingly called upon to protect and pay the pension obligations promised by large, troubled corporations." It added that "while the plan sponsor may be bankrupt, the parties that have been dealing with the plans are not, and it may be possible to recover assets from these parties on behalf of the plan's participants. The PBGC "should routinely conduct full forensic audits of distressed employee pension plans."
"Unfortunately, at this time, forensic audits of pensions virtually never are undertaken and wrongdoing related to pension failures has gone undetected," the letter said. The SEC staff report "raised serious questions about whether some pension consultants are fully disclosing potential conflicts of interest that may affect the objectivity of the advice given to their pension plan clients," it added.
The letter also calls on the PBGC to conduct a forensic audit of the pension funds at Northwest Airlines Corp., Eagan, Minn. Its plans had $5.4 billion in assets and $9.2 billion in liabilities as of last Dec. 31, according to an SEC filing. "There's a real danger of a domino effect in the airline industry and beyond, where companies feel they can't compete unless they dump their pension obligations onto the PBGC," the letter said.