The Pension Benefit Guaranty Corp. is suing the former owners of bankrupt Freedom Communications Inc. for making what the lawsuit said were "ill-advised, highly speculative investments" that caused "tens of millions of dollars" in losses to the already underfunded pension plan.
The complaint was filed Feb. 14 in U.S. District Court in Santa Ana, Calif., by the PBGC, which became trustee of the pension plan in May 2016. The plan was terminated in March 2016, after company assets were sold and the company ceased operations.
The investments in question include a speculative foreign hedge fund, company stock that is now worthless and several life insurance schemes that former company owners Aaron Kushner and Eric Spitz had hoped would "instantly improve" the pension plan's funded status, according to the PBGC complaint.
The PBGC also named actuarial and other consultants involved in the life insurance purchases, which agency lawyers said inflated the value of the policies by valuing them at present value rather than the cash surrender value. "Kushner and Spitz abandoned the program when they realized that the pension plan was legally required to use the cash surrender value, resulting in a loss to the pension plan of over $7 million dollars," the PBGC complaint said.