Report: Hostess Diverted Wages Meant For Pensions
Posted in the Minneapolis Forum
#1 Dec 10, 2012
Hostess Brands acknowledged for the first time in a news report Monday that the company diverted workers' pension money for other company uses.
The bankrupt baker told The Wall Street Journal that money taken out of workers' paychecks, intended for their retirement funds, was used for company operations instead. Hostess, which was under different management at the time the diversions began in August 2011, said it does not know how much money it took.
"It's not a good situation to have," Hostess CEO Gregory Rayburn told the WSJ.
"Whatever the circumstances were, whatever those decisions were, I wasn't there," Rayburn added. As the founder and owner of Kobi Partners, a restructuring advisory firm, Rayburn was appointed acting CEO in March 2012.
Hostess Brands, which filed for bankruptcy for a second time in January, started liquidating its operations in November after the bakers' union refused to take another pay cut and went on strike. The liquidation will leave about 18,000 workers without jobs.
In November, a judge approved Hostess' plan to pay $1.8 million in bonuses to 19 executives, according to CNBC. Rayburn declined to take a bonus but also avoided a company-wide pay cut that he imposed, Hostess told HuffPost.
Twinkies are unlikely to go extinct, since Hostess is in talks with 110 buyers about its brands. But the snack cake genre may need a revamp, as Americans have become increasingly health- and quality-conscious.
#2 Dec 10, 2012
Their pensions will be fine. There are protections in place for this. Called the Pension Benefit Guaranty Corporation.
#3 Dec 10, 2012
If the company is liquidated WE could get stuck for the diminished pensions, by poor management, lying moron....
Ryan Nicholson for The Wall Street Journal
Hostess Brands Inc. said it used wages that were supposed to help fund employee pensions for the company's operations as it sank toward bankruptcy.
After nearly 22 years at Hostess, former forklift operator Craig Davis is pondering his future on the front porch of his home in Emporia, Kan.
It isn't clear how many of the Irving, Texas, company's workers were affected by the move or how much money never wound up in their pension plans as promised.
After the company said in August 2011 that it would stop making pension contributions, the foregone wages weren't put toward the pension. Nor were they restored.
The maker of Twinkies, Ho-Hos and Wonder Bread filed for bankruptcy protection in January and shut down last month following a strike by one of the unions representing Hostess workers. A judge is overseeing the sale of company assets.
Gregory Rayburn, Hostess's chief executive officer, said in an interview it is "terrible" that employee wages earmarked for the pension were steered elsewhere by the company.
"I think it's like a lot of things in this case," he added. "It's not a good situation to have."
Mr. Rayburn became chief executive in March and learned about the issue shortly before the company shut down, he said. "Whatever the circumstances were, whatever those decisions were, I wasn't there," he said.
A spokeswoman for Hostess's previous top executive, Brian Driscoll, declined to comment.
Hostess hasn't previously acknowledged that the foregone wages went toward its operations.
The maneuver probably doesn't violate federal law because the money Hostess failed to put into the pension didn't come directly from employees, experts said.
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