Aircraft Mechanics Fraternal Association asked for a forensic audit of the pension fund of Northwest Airlines Inc., Eagan, Minn., to determine if malfeasance contributed to the financial problems of the retirement plan, in light of the SEC report on potential serious conflicts of interests in the pension consulting industry.
O.V. Delle-Femine, AMFA national director — in a letter sent June 21 to Bradley D. Belt, executive director of the PBGC, and Elaine L. Chao, secretary of labor — asked the PBGC to undertake the audit.
Maryanne DeMarco, AMFA legislative liaison, said the association asked the PBGC to conduct the audit, even though Northwest has not terminated its pension plans, because of the PBGC's oversight of corporate pension plans.
Northwest had $5.4 billion in pension assets and $9.2 billion in liabilities at the end of 2004, according to an SEC filing.
"The Northwest Airlines Contract Employees Pension Plan was underfunded by approximately 50% as of 2004. ... This is poor by any measure," the letter said.
"The PBGC and its plan termination insurance are increasingly called upon to protect and pay the pension obligations promised by large, troubled corporations," the letter added. "The PBGC and responsible plan fiduciaries should, as a matter of course, 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 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," the letter said. "The implication is that tainted advice may cause avoidable losses or pension underperformance."
A PBGC spokesman could not be reached for comment.
Kurt Ebenhock, Northwest spokesman, said company officials could not immediately comment.