WASHINGTON - The Pension Benefit Guaranty Corp. sued Armco Inc. to recover $21.4 million for the pension plan of its subsidiary, Reserve Mining Co.
An Armco spokesman said the company had not received the lawsuit and had no comment on the PBGC's complaint.
Reserve Mining, of Silver Bay, Minn., had a pension plan covering 2,000 employees and retirees and was underfunded by about $21 million when it was terminated in May 1987.
The company was partly owned by First Taconite Inc., a subsidiary of Armco, and partly owned by Republic-Reserve Inc., a subsidiary of LTV Corp.
In the suit, filed in a U.S. District Court in Minnesota, the PBGC contended Armco was the alter ego for First Taconite.
The PBGC's suit stems from a 1991 federal appeals court decision, (Minnesota Power vs. Armco Inc.) the court said that Reserve Mining served as a facade for Armco because Reserve Mining had officers and directors who had little or no power and acted as a front for Armco's dealings.
In turn, the PBGC alleged First Taconite also was an alter ego of Armco because First Taconite served a function similar to Reserve Mining.
In 1986, both First Taconite and Republic-Reserve filed for bankruptcy.
A PBGC spokeswoman said that Armco was responsible for the underfunding of the plan because under the 1974 Employee Retirement Income Security Act, owners of a collectively owned company are jointly and severally liable for the funding of the pension plan.
In addition, the PBGC didn't learn of Armco's relationship with Reserve Mining until after the 1991 appellate decision; under federal bankruptcy law, it was too late to file a suit against Republic-Reserve at that point.