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“ON THE INTRODUCTION OF THE ``INSIDER STOCK SALES EMPLOYEE NOTIFICATION ACT''” mentioning the U.S. Dept of Labor was published in the Extensions of Remarks section on pages E255-E256 on March 5, 2002.
The publication is reproduced in full below:
ON THE INTRODUCTION OF THE ``INSIDER STOCK SALES EMPLOYEE NOTIFICATION
ACT''
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HON. GEORGE MILLER
of california
in the house of representatives
Tuesday, March 5, 2002
Mr. GEORGE MILLER of California. Mr. Speaker, I rise for the purpose of introducing the ``Insider Stock Sales Employee Notification Act,'' a measure that will require company executives who sell stock to immediately notify the company pension plan officials. The bill would allow all employees to be given early warning in cases where executives begin dumping company stock.
Unfortunately, the Enron and Global Crossing scandals have shown us that employee retirement savings are vulnerable to misconduct and abuse by company officials. In the past few months we have learned that Enron and Global Crossing executives sold millions of dollars worth of company stock while encouraging employees to keep company stock in their retirement accounts, and prohibiting some employees from selling their company matched 401(k) shares.
Employer-sponsor investment rules are rigged against employees. Companies often have one set of rules for executives--which permit windfall profits from sales of stock without restriction--and another for rank-and file employees, whose freedom to rescue their savings by selling company matched stock is often restricted by employers.
Last week, the Wall Street Journal published two shocking stories that further document the inequities that employees endure when companies confront huge losses: loyal employees see their 401(k)'s evaporate while executives continue to pocket vast fortunes. As the Journal reported:
``. . . [T]op executives at many companies, including Enron, Lucent, Global Crossing, Kmart and WorldCom have seemed intent on preserving their lush compensation even as their companies flounder and their employees lost jobs, severance, medical benefits and retirement savings.''
Also, last week the Los Angeles Times reported that ``Global Crossing workers lost about $250 million between 1999 and 2001 when the value of the company stock in ``their 401(k) accounts tumbled,'' and that while the company ``cut off severance pay to thousands of laid-off workers when it filed for bankruptcy . in the preceding months [it] forgave loans and made $15 million in lump-sum pension payments to certain executives.''
I am inserting complete copies of these articles in the Record today.
Pension reform must provide equity to employees. Employees have a right to know when their executives are dumping company stock. They should then be able to make an informed decision as to whether they want to sell any of their own company stock in their retirement accounts. They should be able to receive accurate financial information about their company. They should have a right to have equal representation on the pension administrative committee. They should have the right to sell company-matched stock after only one year. And they should certainly be assured that when company officials breach their trust, the will be held fully accountable for their actions.
I urge the members to joint me in sponsoring this new measure, and the Employee Pension Freedom Act (H.R. 3657) that I introduced earlier this year.
Ex-Employees Questioned on 401(k) Plan
(By Liz Pulliam Weston)
The Labor Department is questioning former Global Crossing Ltd., workers about the bankrupt company's 401(k) retirement plan, apparently to determine if any pension laws were broken.
Former Global Crossing employees said this week they have been contacted by Labor Department investigators, who asked for copies of documents distributed to workers describing the company's 401(k) plan and its features.
The investigators ``said that they were opening an investigation into Global Crossing's 401(k) program and
[were] very interested in any additional information that they could glean from any present or former employee,'' said one former employee, who asked not to be identified.
Global Crossing workers lost about $250 million between 1999 and 2001 when the value of the company stock in their 401(k) accounts tumbled from a peak of $64 to 30 cents before the company filed the fifth-largest bankruptcy in U.S. history Jan. 28.
A Global Crossing spokeswoman said the company had been contacted by Labor Department investigators and was cooperating.
``Our [attorneys] will work to provide all necessary information and answer any questions [investigators] may have,'' said spokeswoman Janis Burenga.
The Labor Department routinely examines the retirement plans of companies that have filed for bankruptcy to make sure employees' retirement money is safe and being properly distributed as companies reorganize, said department spokeswoman Gloria Della. Della would neither confirm nor deny that such an investigation was taking place at Global Crossing.
The telecom giant, which is based in Bermuda and has executive offices in Beverly Hills, is under investigation by the Securities and Exchange Commission and the FBI for its accounting methods. In addition, members of Congress have demanded investigations into the company's retirement plans, and employees have sued over losses in their 401(k) accounts.
Global Crossing employees said labor investigators also questioned them about the company's severance packages. Global Crossing cut off severance pay to thousands of laid-off workers when it filed for bankruptcy, but in the preceding months forgave loans and made $15 million in lump-sum pension payments to certain executives.
Regulators simply may be making sure employee contributions were deposited into the 401(k) plan, said Los Angeles pension lawyer Alex Brucker. Troubled companies sometimes illegally use 401(k) contributions to pay bills, although such behavior is far more common at small, private companies than at large, publicly traded firms, pension lawyers said.
Global Crossing spokeswoman Tisha Kresier said all employee contributions have been properly deposited in the plan.
Labor investigators also may be probing whether employees were advised of the risks of investing in company stock, which at one point made up more than half the 401(k) plan's assets, pension experts said.
Rep. George Miller (D-Martinez) asked the Labor Department last week to determine whether any of the trustees of Global Crossing's savings plan were aware of the company's financial problems and what steps the trustees took, if any, to protect employees.
Miller also plans to introduce a bill today that would require executives who sell company stock to alert company employees and pension officials within 24 hours.
Rep. Louise McIntosh Slaughter (D-N.Y.) has requested a congressional inquiry into Global Crossing's decision to freeze workers' 401(k) accounts for a month before the bankruptcy.
This legal but controversial practice, known as a lockdown, was used by both Global Crossing and bankrupt energy trader Enron Corp. when the companies switched plan administrators.
Several lawmakers have introduced bills that would limit how long lockdowns can last.
Global Crossing's stock already had lost 99% of its value by the time its lockdown began Dec. 14. Global Crossing's 401(k) plan was typical for a large firm, offering a range of investment options including stock and bond mutual funds as well as company stock.
Both firms matched their employees' contributions only with shares of company stock, however, and placed restrictions on workers' ability to sell those shares. Consumer and pension rights advocates say such restrictions--also not uncommon among employers--prevented many employees from diversifying their accounts.
In December, Global Crossing lifted restrictions on employees' ability to sell company shares in their 401(k)--long after most of the shares' value had disappeared. Even then, many employees did not sell their shares, saying they were told by executives that the stock price would recover.
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